US business inventories point to slower Q1 growth

February business inventories increase 0.4%
February business inventories increase 0.4%

U.S. business inventories rose a bit less than expected as sales rebounded, suggesting a slow pace of restocking could weigh on economic growth in the first quarter.

The Commerce Department said on Monday inventories increased 0.4 percent in February after rising by the same margin in January.

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Economists polled by Reuters had forecast inventories increasing 0.5 percent in February.

An employee operates a forklift at the distribution center of the Oregon Freeze Dry facility in Tangent, Oregon.
Leah Nash | Bloomberg | Getty Images

Inventories are a key component of gross domestic product changes. Retail inventories, excluding autos, which go into the calculation of GDP, rose 0.2 percent. That followed a 0.6 percent rise in January. Motor vehicle inventories fell for a second straight month.

Businesses accumulated too much stock in the second half of last year and are placing fewer orders with manufacturers while they work through the pile of unsold goods.

That, together with severe weather, the expiration of long-term unemployment benefits and food stamps cuts, is expected to weigh on first-quarter GDP growth. Inventories were neutral to fourth-quarter GDP growth.

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In February, business sales increased 0.8 percent. Sales had declined 1.1 percent in January.

At February's sales pace, it would take 1.31 months for businesses to clear shelves. That was unchanged from January and was the highest ratio since September 2009.

By Reuters