WASHINGTON (AP) -- Businesses likely increased their stockpiles in March even though sales likely slipped.
Economists were predicting that business stockpiles grew 0.3 percent in March compared with February, according to a survey by FactSet. The Commerce Department will release the report at 10 a.m. EDT Monday.
In February, stockpiles rose 0.1 percent. More restocking could lead the government to revise up its estimate of economic growth for the January-March quarter.
The government reported last week that stockpiles held by wholesalers rose 0.4 percent in March. But sales at the wholesale level dropped 1.6 percent, the biggest setback since March 2009.
The report Monday will provide a look at stockpiles in manufacturing as well as the wholesale and retail levels of business.
Inventory rebuilding can be a positive for economic growth because it means stronger production at the nation's factories.
But increased restocking at a time of falling sales can signal trouble for the economy. If the falling demand leads businesses to reverse course and cut their stockpiles, those cutbacks would dampen factory production and economic growth.
The government estimated last month that the economy grew at an annual rate of 2.5 percent in the January-March quarter. That was up from a growth rate of 0.4 percent in the previous quarter.
Growth accelerated in the first quarter largely because consumer spending rose at the fastest pace in more than two years. That also provided more incentive for businesses to restock their shelves after many cut back on inventory building at the end of last year.
Even with the gains, many economists expect growth has slowed slightly in the current April-June quarter to around 2 percent and is likely to stay around that reduced level for the rest of this year.
A key reason for the expected slowdown is that higher Social Security taxes may be starting to catch up with consumers. While spending surged from January through March, it began to show signs of slowing toward the end of the quarter. Spending at retail business fell in March by the largest amount in nine months.
The tax increase kicked in on Jan. 1 and has cut take-home pay for most Americans. A person earning $50,000 a year has $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.
Deep automatic federal spending cuts that began on March 1 are also weighing on growth. Federal agencies have been forced to furlough workers and make other cutbacks to stay within their reduced budgets for this year.
Steady job growth could offset some of the fiscal drag. The economy has added an average of 208,000 jobs a month from November through April. That's up from only 138,000 a month in the previous six months. The job gains could provide consumers with more money to offset the impact of the tax increase.