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March Business Inventories Reaffirm Slow Q1 Growth for US

H.S. Borji
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March Business Inventories Reaffirm Slow Q1 Growth for US

US business inventories increased steadily in March, but a slowdown in retail inventories offered further proof economic growth was subdued in the first quarter.

Business inventories rose 0.4 percent in March, following an upwardly revised gain of 0.5 percent the prior month, the Commerce Department reported today in Washington. The reading was in line with a broad consensus of market analysts who called for a gain of 0.4 percent.

Compared to March 2013, total business inventories increased 4.7 percent, official data showed.

Merchant wholesalers registered the largest increase in inventory. Wholesale inventories climbed 1.1 percent in March and 5.9 percent annually. Manufacturing inventories rose 0.1 percent in March and 2.6 percent annually.

Retail inventories excluding automobiles barely rose in March, stroking fears economic growth could remain subdued in the second quarter. The 0.1 percent monthly gain in retail stocks was well below the 1.1 percent increase government economists had assumed in their advance first quarter GDP estimate.

Compared to March 2013, retail inventories rose 6.1 percent.

Inventories, which are a key component of gross domestic product, suggest manufacturers in March were still working their way through current stocks of unsold goods. Retailers, manufacturers and wholesalers restock their shelves to ensure they can meet demand. The pace of inventory growth in March suggests business expectations remained steady at the end of the first quarter. Economists expect to see faster restocking in the coming months in response to pent-up demand. This is likely to translate into a steady rise in factory orders and overall production.

The government’s advance first quarter GDP report showed the economy expanded 0.1 percent in the first three months of the year. However, March trade, construction and factory inventory data suggest the economy probably contracted in the first quarter, supporting the view the US economy was weighed down by more than just inclement weather.

Testimony from Fed Chair Janet Yellen last week suggests the central bank is not concerned about the growth outlook. Testifying before the Joint Economic Committee, Yellen said she expects the economy to accelerate further in 2014, which would continue to support job creation and push inflation closer to the Fed’s 2 percent target.

The Commerce Department will report on consumer price inflation Thursday, the same day the Labor Department releases weekly jobless claims.

The business inventories report showed total business sales increased 1 percent in March, the largest gain since May 2013. Business sales had increased 0.9 percent in February. Compared to the previous 12 months, business sales were up 4.3 percent, official data showed.

Sales among retailers increased 1.5 percent month-on-month and 4 percent annually.

Merchant wholesalers’ sales increased 1.4 percent month-on-month and 6.5 percent annually.

Sales at manufacturers edged up 0.2 percent month-on-month and 2.6 percent annually, official data showed.

At March’s sales pace, it would take businesses 1.3 months to clear current inventories, unchanged from the prior month.

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