WASHINGTON (AP) — U.S. businesses increased their stockpiles in April by the largest amount in nearly a year while their sales posted a second straight healthy advance.
Inventories held by businesses rose 0.4 percent in April compared to March when stockpiles had risen a much smaller 0.1 percent, the Commerce Department reported Thursday. It was the largest increase since a 0.5 percent rise in May 2014.
Total business sales rose 0.6 percent in April following a similar 0.6 percent rise in March. The March performance had been the first sales increase after seven consecutive monthly declines.
The expectation is that further sales increases will bolster boost business confidence and lead companies to boost their stockpiling. The rise in stockpiles will support production gains at factories and overall economic growth.
A separate report Thursday showed that retail sales rose 1.2 percent in May, a solid performance as demand for autos, clothing and building materials all increased, an encouraging sign that consumer spending, which accounts for 70 percent of economic activity, is rebounding.
For April, stockpiles rose by 0.8 percent at the retail level while inventories posted smaller gains of 0.4 percent at the wholesale level and 0.1 percent for manufacturers.
A harsh winter, a strong dollar and a plunge in energy prices that squashed investment spending combined to send the economy into reverse in the first three months of the year. The overall economy, as measured by the gross domestic product, contracted at an annual rate of 0.7 percent in the January-March quarter.
Economists say the economy has emerged from that soft patch and will see stronger activity for the rest of the year. They are forecasting growth of around 2 percent to 2.5 percent in the current April-June quarter and expect growth to accelerate to around 3 percent in the second half of this year.
This rebound is contingent on continued strength in the job market, which should boost consumer incomes and power gains in consumer spending. Last week, the government reported that payrolls increased by a robust 280,000 in May.