US business inventories rise modestly as sales surge

[WASHINGTON] US business inventories barely rose in April as sales recorded their biggest increase in more than two years, pointing to a slow pace of inventory accumulation that could weigh on economic growth in the second quarter.

The Commerce Department said on Tuesday inventories gained 0.1 per cent after a downwardly revised 0.3 per cent rise in March. Economists polled by Reuters had forecast inventories, a key component of gross domestic product, gaining 0.2 per cent in April after a previously reported 0.4 per cent increase in March.

Auto inventories ticked up 0.1 per cent after surging 2.3 per cent in March. Retail inventories excluding autos, which go into the calculation of GDP, fell 0.2 per cent in April.

That was the largest drop in nearly a year and followed a 0.1 per cent gain in March.

Inventories last contributed to GDP growth in the first quarter of 2015 and have been a drag in each of the last three quarters. Businesses accumulated record inventory in the first half of 2015, which outstripped demand.

Though the pace of accumulation slowed, inventories remained high in the second half of 2015 and the first quarter of 2016.

Business sales rose 0.9 per cent in April, the largest increase since February 2014, after gaining 0.2 per cent in March. At April's sales pace, it would take 1.40 months for businesses to clear shelves. The was the smallest since last December and was down from 1.41 months in March.

REUTERS