US business stockpiles frozen in January

AP News
Posted: Mar 12, 2015 11:28 AM
US business stockpiles frozen in January

WASHINGTON (AP) — U.S. businesses did not add to their stockpiles for a second straight month in January as total business sales fell by the largest amount in nearly six years.

Business stockpiles were unchanged following a similar flat reading in December, the Commerce Department reported Thursday. Sales in January dropped 2 percent. That was the sixth straight monthly sales decline and the biggest monthly drop since sales tumbled 2.7 percent in March 2009 during the depths of the last recession.

While businesses have slowed their stockpiling in the face of falling sales, economists remain optimistic that activity will rebound in coming months. Solid employment growth and falling gas prices should give consumers more money to spend on other items.

The economy added 295,000 jobs in February, marking the 12th consecutive month that job gains have been above 200,000. That is the longest stretch since 1994 to 1995.

Analysts believe the new jobs will bolster consumer spending, which accounts for 70 percent of economic activity. Stronger demand is expected to spur restocking by businesses at all levels of the supply chain from manufacturing to wholesalers to retailers.

In the fourth quarter, economic growth, as measured by the gross domestic product, slowed to just 2.2 percent, slower than the government's initial estimate of 2.6 percent.

Much of the revision in GDP growth occurred because inventory building in the fourth quarter was weaker than initially estimated. But analysts say that could translate into strength in the current quarter as businesses build up their relatively lean inventories.

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The January sales decline was led by a 3.1 percent drop in sales at the wholesale level. Manufacturing and retail sales were also down. Inventories in January dropped 0.4 percent at the manufacturing level and were flat at the retail level, while wholesalers saw a 0.3 percent increase in inventories.

A separate report Thursday showed that retail sales fell 0.6 percent in February as auto purchases dropped the most in more than a year.