US businesses boosted stockpiles by 0.4 per cent in February as sales rose sharply

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WASHINGTON – U.S. businesses boosted their stockpiles in February as sales rebounded by the largest amount in nine months.

Stockpiles increased 0.4 per cent in February following a similar 0.4 per cent increase in January, the Commerce Department reported Monday. Sales rose 0.8 per cent in February, bouncing back after a 1.1 per cent sales decline in January that was blamed on the harsh weather that month. It was the biggest one-month sales gain since last May.

A separate report showed a surge in sales at the retail level in March, providing support to the view that stronger consumer spending in coming months will encourage businesses to restock their shelves and provide a boost to the economy.

While the economy slowed in the January-March quarter, many economists are looking for a strong rebound in the current quarter.

The report on business inventories covers all kinds of stockpiles, including manufacturing, wholesaling and retailing.

Inventories held by manufacturers rose the most in February, a gain of 0.7 per cent, while inventories at the wholesale level were up 0.5 per cent. Stockpiles held by retailers were unchanged in February.

Many analysts believe that the economy, which grew at a 2.6 per cent rate in the October-December quarter, slowed in the January-March period, to somewhere between 1 per cent and 2 per cent growth.

That forecast is based on a view that the harsh winter weather cut into various types of economic activity, from shopping at the mall to factory production. Some believe that adverse weather cut growth by about 1 percentage point in the first quarter, but will add 1 percentage point to activity in the April-June quarter as the economy is spurred by pent-up demand in such areas as auto sales.

Another factor that affected first-quarter growth is a slowdown in the pace of restocking following a huge surge last summer.

Inventory building contributed 1.6 percentage points to economic growth in the third quarter when the economy had grown at a 4.1 per cent rate. By the fourth quarter, that contribution had dwindled to just 0.03 percentage points. Analysts are not looking for inventories to add much to first quarter growth.

But for the rest of the year, there is optimism that growth will rebound to a solid rate of around 3 per cent. That could make 2014 the country’s strongest year of growth since 2005.

Labour markets are improving. Employers added a solid 192,000 jobs in March, just below a revised 197,000 increase in February. Those gains suggest that the economy has recovered from the hiring slowdown caused by severe winter storms in December and January.

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