Ahead of the Bell: US business inventories

US business inventories expected to show gain in February

Associated Press
US businesses increased stockpiles 0.4 percent
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In this May 22, 2013 photo, Kenneth Paull works on a machine at Dokka Fasteners in Auburn Hills, Mich. The Commerce Department will report on business stockpiles for February 2014 on Monday, April 14, 2014. (AP Photo/Paul Sancya)

WASHINGTON (AP) -- The Commerce Department will report on business stockpiles for February. The report will be released at 10 a.m. Eastern on Monday.

STOCKPILES UP: Economists at JPMorgan Chase forecast that inventories rose 0.6 percent in February following a 0.4 percent gain in January.

FURTHER GAINS: Inventories are being driven higher on the belief that business sales will rise as the economy recovers from a harsh winter.

The report on business inventories covers all kinds of stockpiles, including manufacturing, wholesaling and retailing.

An advance report last week showed that stockpiles at the wholesale level increased 0.5 percent in February, the eighth consecutive monthly gain.

Businesses will restock their shelves at a more rapid pace to ensure that they can meet rising demand. That will mean more orders at factories and rising production, which would boost economic growth.

Many believe that the economy, which grew at a 2.6 percent rate in the October-December quarter, slowed in the January-March period, possibly to around 1 percent.

That forecast is based on a view that the harsh winter weather cut into various types of economic activity, from shopping at the mall to factory production. Some believe that adverse weather cut growth by about 1 percentage point in the first quarter, but will add 1 percentage point to activity in the April-June quarter as the economy is spurred by pent-up demand in such areas as auto sales.

Another factor that affected first quarter growth is a slowdown in the pace of restocking following a huge surge last summer.

Inventory building contributed 1.6 percentage points to economic growth in the third quarter when the economy had grown at a 4.1 percent rate. By the fourth quarter, that contribution had dwindled to just 0.03 percentage points. Analysts are not looking for inventories to add much to first quarter growth.

But for the rest of the year, there is optimism that growth will rebound to a solid rate of around 3 percent. That could make 2014 the country's strongest year of growth since 2005.

There has been good news on the hiring front in the past two months. Employers added 192,000 jobs in March, just below a revised 197,000 increase in February. Those gains suggest that the economy has recovered from the hiring slowdown caused by severe winter storms in December and January.

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