US business stockpiles likely to show modest gain in September

Economic Indicators Associated Press

The Commerce Department reports on business stockpiles in September. The report will be released at 10 a.m. EST Friday.

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STOCKPILES UP: The expectation is that businesses increased their stockpiles by 0.3 percent in September, according to a survey of economists by data firm FactSet.

INVENTORY GAINS: In August, businesses boosted their stockpiles by 0.2 percent, the smallest amount in more than a year, while sales fell by the largest amount since January.

The data suggests that pockets of the economy are still having trouble gaining momentum.

A report earlier this week showed that inventories held by wholesalers increased 0.3 percent in September while sales at the wholesale level rose 0.2 percent, a slight rebound following a 0.8 percent drop in sales in August.

The big August setback in sales may have made businesses more cautious about restocking their shelves until they see more evidence of rising demand. When companies add goods to their stockpiles it typically reflects optimism about future demand while reductions in inventory restocking can be a sign of uneasiness about future demand.

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Inventory changes can have a big impact on the economy. In the April-June quarter, faster inventory building by businesses accounted for 1.4 percentage points of the 4.6 percent annual growth rate. In the July-September period, inventory building slowed and this subtracted 0.6 percentage point from growth.

The economy still posted a healthy growth rate of 3.5 percent in the July-September period, and many economists believe growth will remain at a solid pace around 3 percent in the current October-December quarter and for all of next year.

The optimism is based in part on the sustained gains that have been made in hiring and in driving the unemployment rate lower. The jobless rate fell to 5.8 percent for October, the lowest point in more than six years.