WASHINGTON – U.S. companies boosted their stockpiles at the fastest rate in nine months in October as their sales grew. The gain in restocking indicates businesses anticipated a healthy holiday shopping season.
Business inventories increased 0.7 per cent in October, the Commerce Department said Thursday. That follows a 0.6 per cent gain in September. Sales rose 0.5 per cent, above a 0.3 per cent gain the previous month.
The increase could signal better growth in the October-December quarter than some economists had anticipated. Greater restocking boosts growth because it requires more factory production.
Growth is still likely to slow from the July-September quarter’s robust 3.6 per cent annual rate, half of which came from a jump in restocking.
But consumers appear to be spending more, a trend that will help keep the economy growing at solid pace.
A separate report Thursday showed that retail sales rose 0.7 per cent in November, the biggest gain in five months. Americans spent more on big-ticket items such as cars, electronics, appliances and furniture. They also made more purchases online.
Retail sales have risen at a healthy clip for two straight months. That suggests that steady hiring has given Americans greater confidence to spend more.
The October gain in inventories comes after companies built up huge stockpiles in the July-September quarter. So far, however, economists say that inventories don’t appear to be outpacing sales. A measure of inventories as a per cent of sales shows that stockpiles are in line with historical averages.
Still, stockpile changes are likely to contribute much less to growth in the final three months of the year — and maybe even subtract from overall growth. That’s why many economists forecast that the economy will expand at a 2 per cent to 2.5 per cent annual rate in the October-December period.
The business inventories report includes data on stockpiles held by wholesalers, manufacturers and retailers. Wholesale businesses increased their stockpiles 1.4 per cent in October, the fastest pace in two years. Retail inventories rose 0.8 per cent and manufacturers added 0.1 per cent.