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Economy Title: Business Inventories in U.S. Climb 0.5%, Most Since July 2008 April 14 (Bloomberg) -- Inventories in the U.S. rose 0.5 percent in February, the most since July 2008, as companies boosted orders to try to keep up with sales. The gain in the value of stockpiles was larger than anticipated by the median forecast of economists surveyed by Bloomberg News and followed a revised 0.2 percent increase the prior month, data from Commerce Department showed today in Washington. Sales climbed 0.3 percent. Companies are set to begin boosting investment and output in coming months after the worst recession in seven decades forced a record drawdown in stockpiles last year. Efforts to stabilize inventories in the fourth quarter accounted for two- thirds of that quarter’s 5.6 percent growth pace. “The extended run of strong demand is now compelling businesses to begin building inventory,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “Inventories should start to climb toward normal levels as firms become more expansionary.” Business inventories were forecast to rise 0.4 percent after a previously estimated unchanged reading in January, according to the median estimate of 48 economists surveyed by Bloomberg News. Estimates ranged from no change to a gain of 0.5 percent. Another report from the Commerce Department today showed retail sales climbed 1.6 percent in March, the most in four months, a sign consumers will play a bigger role in the broadening recovery. Little Inflation A report from the Labor Department showed consumer prices rose 0.1 percent in March from the prior month. Excluding food and energy, prices were unchanged, a sign the Federal Reserve doesn’t need to be concerned about inflation. Companies had 1.27 months’ supply of goods on hand in February, matching the prior month’s reading as the lowest since November 2007, today’s inventories report showed. Retailers’ inventories, the only part of today’s report not previously released, increased 0.3 in February after rising 0.1 percent the prior month. Sales, excluding food, increased 0.2 percent in February. The gain in store stockpiles was led by a 1.3 percent jump at auto dealers. Inventories at furniture, clothing and department stores all dropped as sales climbed, signaling orders will climb in coming months, keeping factories humming. Recent reports suggest the replenishment of depleted stockpiles is lifting production. The Institute for Supply Management’s manufacturing gauge rose to 59.6 in March, the highest level since July 2004. Factory inventories rose 0.5 percent, the most since August 2008, and wholesale stockpiles increased 0.6 percent, today’s report showed. Efforts to stabilize inventories contributed 3.8 percentage points to the U.S. economy’s 5.6 percent annual rate of expansion in the fourth quarter of 2009. Last quarter’s growth rate was the strongest in six years. Comment: This is a surprise positive for GDP in Q2...inventories are a double edged sword tho...if they aren't drawn down they will be a negative, i.e. subtracted out, for Q3...
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