US business inventories rise as sales remain weak

[WASHINGTON] US business inventories rose in January as sales continued to decline, suggesting businesses could take longer than previously thought to reduce the stock of unsold merchandise clogging up warehouses.

The Commerce Department said on Tuesday that inventories increased 0.1 per cent. December's inventories were revised down to show them unchanged instead of ticking up 0.1 per cent as previously reported.

Economists polled by Reuters had forecast inventories, which are a key component of gross domestic product, to be unchanged in January.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.2 per cent in January after a similar rise in December.

Government data last month showed businesses had made less progress reducing the inventory overhang in the fourth quarter than initially thought. Inventories subtracted just over one-tenth of a per centage point from fourth-quarter GDP growth.

Businesses accumulated record inventory in the first half of 2015, outpacing demand. Though the pace of restocking slowed, inventories remained high in the second half of the year, posing a downside risk to GDP growth in 2016.

Business sales fell 0.4 per cent in January after decreasing 0.7 per cent in December. At January's sales pace, it would take 1.40 months for businesses to clear shelves. That was the highest inventory-to-sales ratio since May 2009 and up from 1.39 in December.

The high ratio suggests businesses could continue working through the inventory glut through the first half of the year, hurting manufacturing and curbing GDP growth.

REUTERS