U.S. businesses increased their stockpiles in December at the slowest pace since August, while sales fell by the largest amount in nearly a year.
Stockpiles rose a slight 0.1 percent in December following a modest 0.2 percent gain in November, the Commerce Department reported Thursday. Sales dropped 0.9 percent in December after a 0.4 percent fall in November. It was the fifth consecutive month that sales have decreased, and it was the biggest drop since a 1.3 percent decline in January 2014.
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The deceleration in inventory growth in recent months could be a reaction to the weakness in sales, with businesses cutting back on restocking amid falling demand. Economists, however, remain bullish that sales will rebound in 2015 and businesses will respond by boosting their inventories. Increased restocking should power higher factory production and support overall economic growth.
The optimism about sales reflects strong gains in employment, which should power consumer spending in coming months.
Employers added 257,000 jobs in January, capping the most robust three-month pace of hiring in 17 years. The strength in the labor market is expected to show up in rising consumer spending.
For December, inventories held by retailers increased 0.5 percent while stockpiles at the wholesale level were up 0.1 percent. Manufacturing inventories fell 0.3 percent.
A separate report Thursday said that retail sales fell 0.8 percent in January as gas prices plunged and auto sales slowed. But outside those two categories, sales edged up 0.2 percent after a flat reading in December.