U.S. business stockpiles rose seasonally adjusted 0.6% in February, to US$1.58T, nearly 20% above low hit in September 2009; rise suggests businesses are more optimistic about sales
April 16, 2012
– U.S. companies restocked at a steady pace in February, suggesting businesses are more hopeful about sales.
The Commerce Department said Monday that business stockpiles rose a seasonally adjusted 0.6 percent. That's below January's upwardly revised gain of 0.8 percent.
The increase pushed stockpiles to $1.58 trillion. That's nearly 20 percent above the recent low hit in September 2009, just after the recession ended.
Restocking hasn't slowed at the start of the year as much as economists had expected, leading many to raise their forecasts for January-March economic growth.
Larger stockpiles require businesses to order more goods. That leads to more factory production, which boosts growth.
A healthier job market and warmer weather boosted retail sales in March, which likely encouraged businesses to continue restocking at a healthy level.
Businesses are building up their stockpiles after cutting them over the summer amid recession fears. A big jump in restocking was a key reason the economy grew at an annual rate of 3 percent in the October-December quarter.
Steady inventory growth in the first quarter, along with a narrower trade deficit in February and stronger retail sales, has lifted the outlook for growth.
Economists are predicting the economy grew at an annual rate of 2.5 percent to 3 percent in the first three months of the year. That's up from earlier projections of roughly 2 percent.
Still, consumers must continue spending to keep stockpiles growing. So far, sales are rising quickly enough to keep businesses reordering goods.
Job growth is crucial to encourage Americans to spend more. It was strong from December through February. But employers added just 120,000 jobs in March — half the pace from the previous three months. That's raised concerns that job growth could be slowing.
Many economists think March's slowdown was temporary. In the past three months, job gains have averaged 212,000 per month. The unemployment rate has dropped from 9.1 percent in August to 8.2 percent last month.
If the economy continues to average roughly 200,000 new jobs per month, consumers are likely to feel more comfortable about spending.
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