WASHINGTON – U.S. companies built up their stockpiles in November as their sales improved. Continued growth in inventories suggests businesses believe consumers will increase spending in the months ahead.
The Commerce Department said Tuesday that business stockpiles grew 0.4 per cent in November. That follows a strong 0.8 per cent gain in October. Sales increased 0.8 per cent in November after a 0.5 per cent gain the previous month.
Rising stockpiles should help keep economic growth solid in the October-December quarter. Several economists project growth at a 3 per cent annual rate in that period after a 4.1 per cent rate in the previous quarter. Greater restocking boosts growth because it requires more factory production.
Retailers led much of the gains in inventories ahead of the holiday shopping season. Wholesalers also increased their stockpiles. Stockpiling by manufacturers was flat.
But increases in stockpiles can also pose risks for economic growth. Two-fifths of the growth in the July-September quarter came from a buildup in stockpiles. All those additional products in stores and on warehouse shelves could weigh heavily on the companies that own them if consumer spending doesn’t accelerate.
Retails sales rose 0.2 per cent in December, slightly slower than the gains in the previous two months.
Americans bought more clothes last month, shopped more frequently online and ate out more often. But they cut back on car and truck purchases compared with November. And they spent less at department stores and on electronics and furniture.
Slower sales can cause retailers, manufacturers and wholesalers to sell their goods at discounted prices, cutting into profits. And those companies will also order fewer new goods, lowering factory output.
Still, most economists said the December gains in retail spending point to growth in consumer spending, which drives roughly 70 per cent of economic activity.