US businesses boost restocking by 1 per cent in January despite 0.3 per cent sales drop

WASHINGTON – U.S. companies increased their restocking in January from December, an encouraging signal that they expect consumers will spend more this year and help the economy grow faster.

The Commerce Department said Wednesday that business stockpiles grew 1 per cent in January. That’s up from 0.3 per cent growth in December and the biggest gain since May 2011.

Total business sales fell 0.3 per cent in January after a slight 0.1 per cent rise in December.

Weak growth in restocking was a key reason the economy barely grew from October through December. Since then, job growth has accelerated and wages have steadily risen. The combination could lead to greater consumer demand, prompting more business restocking and economic growth.

A separate report Wednesday showed that retail sales rose 1.1 per cent in February, providing evidence that consumers are being helped by the stronger wage growth.

Retail stockpiles also increased 4 per cent. Wholesale stockpiles grew 1.2 per cent, the biggest gain in 13 months. Stockpiles held by manufacturers rose 0.5 per cent.

The economy grew only 0.1 per cent rate in the fourth quarter. Still, sharp defence cuts and sluggish restocking, both volatile factors, were the main reasons for the weak growth.

Economists say faster restocking in the current quarter should help lift growth to around 2 per cent in the January-March period.

Demand could rise even further if employers continuing hiring at a brisk pace.

The economy added 236,000 jobs in February. That capped a four-month hiring spree in which the economy averaged 205,000 net jobs per month. And it pushed the unemployment rate to a four-year low of 7.7 per cent, down from 7.9 per cent in January.

Strong auto sales and a steady housing recovery are spurring more hiring, which could trigger more consumer spending and lead to stronger economic growth. Auto sales rose in January and February after reaching a five-year high in 2012.