US business inventories post largest gain in nearly a year

[WASHINGTON] US business inventories recorded their biggest increase in nearly a year in April, which could see economists raise their second-quarter growth estimates.

The Commerce Department said on Thursday business inventories rose 0.4 per cent, the largest gain since May 2014, after edging up 0.1 per cent in March.

Economists polled by Reuters had forecast inventories rising only 0.2 per cent in April.

Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, rose a solid 0.6 per cent in April. That was the biggest increase since November 2013 and followed a 0.1 per cent gain in March.

That will likely boost GDP growth expectations for the second quarter.

The government last month estimated that GDP contracted at a 0.7 per cent annual pace in the first quarter. However, upbeat healthcare spending and stronger-than-previously reported March retail sales, construction spending, trade and wholesale inventory data suggest the economy probably did not contract.

In April, business sales increased 0.6 per cent after a similar rise in March.

At April's sales pace, it would take 1.36 months for businesses to clear shelves - a relatively high ratio that suggests limited scope for businesses to aggressively accumulate stocks. The ratio was unchanged from March.

REUTERS