WASHINGTON – U.S. wholesale businesses increased their stockpiles in November but at less than half the pace of October when they had jumped by the largest amount in two years.
Wholesalers boosted stockpiles 0.5 per cent in November compared with October when inventories had increased 1.3 per cent, the Commerce Department reported Friday. The October gain had been the biggest one-month increase since a 1.5 per cent rise in October 2011.
Sales were solid in both months, rising 1 per cent in November following a 1.1 per cent increase in October.
Rising stockpiles boost growth because it means factories have produced more goods. Robust restocking contributed two-fifths of the 4.1 per cent growth rate in the July-September quarter. Economists say growth slowed in the fourth quarter in large part because they believe the pace of restocking slowed following the third quarter surge.
With the November gain, inventories at the wholesale level stood at a seasonally adjusted $516.4 billion, 3.3 per cent higher than a year ago.
The government tracks inventories held by wholesalers, manufacturers and retailers. A report covering all inventory levels will be released next Tuesday.
At the wholesale level, auto stockpiles dropped by 0.8 per cent in December while stockpiles of computer equipment rose 3 per cent after a big 5.7 per cent decline in October.
Recently, various signs of strength including a big improvement in the trade deficit have prompted economists to boost their forecasts for fourth quarter growth. Some now believe growth will be around 3 per cent, an upgrade from early estimates that growth would be less than 2 per cent.
Analysts believe the momentum will carry over into 2014, reflecting better-than-expected recent gains.
Factory activity as measured by the Institute for Supply Management’s manufacturing index stayed near a 2 1/2-year high in December. Americans are buying more cars and homes, increasing demand for steel, furniture and other manufactured goods.
The reports add to encouraging signs that 2014 could mark a turning point for an economy that has struggled through to gain altitude since the Great Recession ended in June 2009.
Analysts expect the economy will face fewer barriers in 2014 especially in the area of federal government policies. Higher taxes in 2013 and across-the-board spending cuts shaved an estimated 1.5 percentage points from growth last year.
Many economists are looking for growth close to 3 per cent in 2014, up from an expected 1.8 per cent growth rate in 2013.