Businesses inventories rise by largest amount in more than 2 years

August 14 01:08 2015

U.S. businesses boosted their stockpiles in June by the largest amount in more than two years. Businesses increased their stockpiles by 0.8% in June, the biggest increase since January 2013, the Commerce Department reported Thursday.

Economists are hoping that strong gains in employment over the past year will help boost consumer spending in the months ahead, encouraging businesses to keep building their inventories. If consumer demand doesn’t rise, businesses could start cutting back on restocking, which would be a drag on the economy

Sales rose a modest 0.2%. After seven months of declines, sales have now risen for four straight months. In a separate report Thursday, the government said that retail sales posted a solid gain of 0.6% in June. The stockpile report covers inventories held by manufacturers, wholesalers and retailers.

The June expansion left the ratio of inventories to sales at 1.37, meaning it would take 1.37 months for stockpiles to be depleted at the June sales pace. That is the highest level for inventories since June 2009, the month the Great Recession ended. The overall economy grew at an annual rate of 2.3% in the April-June quarter after nearly stalling out with growth of just 0.6% in the first quarter, reflecting the impact a severe winter had on activity. Economists are forecasting growth will accelerate further in the second half of this year as further strong employment gains give consumers more incentive to increase spending.