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Ahead of the Bell: US business inventories

March 12, 2015

WASHINGTON (AP) — The Commerce Department reports on January business stockpiles Thursday at 10 a.m. Eastern.

STEADY AS SHE GOES: The expectation is that business stockpiles were unchanged, according to a survey of economists by data firm FactSet.

INVENTORIES AND SALES: In December, U.S. businesses increased their stockpiles by 0.1 percent, the slowest pace since August. Total business sales fell 0.9 percent in December, marking the fifth consecutive month that sales have fallen.

A preliminary report covering wholesale businesses showed that stockpiles rose a modest 0.3 percent in January while sales at the wholesale level plunged 3.1 percent, the largest decline in six years.

Despite a string of sales declines, economists believe sales will rebound in coming months as falling gas prices and healthy job gains fuel more consumer spending.

The economy added 295,000 jobs in February, marking the 12th consecutive month that job gains have been above 200,000. That is the largest stretch since 1994-95.

It is believed that the job growth will translate to stronger consumer spending, which accounts for 70 percent of economic activity. That in turn would spur restocking by businesses at all levels of the supply chain, from manufacturing to wholesalers and retailers.

In the fourth quarter, economic growth, as measured by the gross domestic product, slowed to just 2.2 percent, even slower than the government’s initial estimate of 2.6 percent GDP growth in the October-December period.

Much of the downward revision in GDP growth occurred because inventory building in the fourth quarter was weaker than initially estimated. But analysts believe that could translate into strength in the current quarter as businesses add to inventories in the first quarter.