US business stockpiles post 0.2 per cent August gain, weakest in 14 months; sales drop

WASHINGTON – U.S. businesses increased their stockpiles in August by the smallest amount in more than a year, while sales fell by the largest amount since January. The data suggest that the economy is still having trouble gaining momentum.

Inventories edged up a slight 0.2 per cent in August after a 0.4 per cent July increase, the Commerce Department reported Wednesday. It was the smallest gain in stockpiles since June 2013. Total business sales fell 0.4 per cent in August after a 0.7 per cent sales increase in July. It was the biggest monthly sales decline since a 1.1 per cent drop in January.

When companies add goods to their stockpiles, it typically reflects optimism about future demand. When inventory growth slows, it can be a sign of concerns about future demand.

Inventories held by retailers fell 0.3 per cent, while inventories held by wholesalers rose 0.7 per cent. Inventories at the manufacturing level edged up a slight 0.1 per cent.

Sales by retailers were up in August but fell for manufacturers and wholesalers.

In a separate report Wednesday, the government said that retail sales in September fell 0.3 per cent, another sign of potential economic weakness. Consumer spending accounts for 70 per cent of economic activity.

Economist have been forecasting that the economy will post healthy growth rates of around 3 per cent in the July-September and October-December quarters, helped by solid gains in hiring. But there are now growing concerns that weakness around the world, especially in Europe, could pose a risk to growth.

Inventory changes can have a big impact on the economy. In the April-June quarter, faster inventory building by businesses accounted for 1.4 percentage points of the 4.6 per cent annual growth rate .

That rebound followed a big slowdown in inventory growth in the first three months of the year that subtracted nearly 1.2 percentage points from growth. The economy contracted at an annual rate of 2.1 per cent from January through March.