Ahead of the Bell: US Business Inventories

US business inventories likely climbed at steady pace in May, potentially lifting growth

Associated Press
US businesses rebuild stockpiles at steady pace
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FILE - In this July 1, 2013, file photo, brewer Ken Hermann rolls a fresh keg of beer onto pallets at the Harpoon Brewery in the Seaport District of Boston. The Commerce Department releases its report on business inventories for May 2014 on Tuesday, July 14, 2014. (AP Photo/Charles Krupa, File)

WASHINGTON (AP) -- The Commerce Department reports on stockpiles held by businesses in May. The report is scheduled to be released at 10 a.m. Eastern Tuesday.

MORE STOCKPILES: Economists forecast that stockpiles rose 0.5 percent in May, according to a survey by data firm FactSet. That would be close to April's increase of 0.6 percent, which was the largest in six months.

STEADY RESTOCKING: A steady restocking of inventories could provide a much-needed boost to growth. When companies add goods to their store shelves and warehouses, it lifts factory production and overall economic growth.

Businesses sharply cut back on restocking in the first three months of the year, a big reason the economy shrank at a 2.9 percent annual rate. That was the largest contraction since the first quarter of 2009, in the depths of the recession.

But since then companies have stepped up their restocking. Wholesale companies boosted their inventories by 0.5 percent in May, after a 1 percent surge in April.

Greater restocking also suggests that companies are confident consumer and business spending will grow, and they want to ensure that they have enough goods to meet the demand.

More restocking should help the economy resume growing in the April-June quarter. Analysts forecast the economy will expand at a 3 percent annual rate.

Businesses have stepped up hiring this year, which means more Americans will have paychecks to spend, likely boosting growth. Employers have added an average of 230,000 jobs a month in 2014, up from 194,000 last year.

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