US business stockpiles likely showed further gain in August

StocksAssociated Press

The Commerce Department reports on business stockpiles in August. The report will be released Wednesday at 10 a.m. EDT.

STOCKPILES RISING: The expectation is that businesses increased their stockpiles by 0.4 percent in August, according to a survey of economists by data firm FactSet.

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INVENTORY GAINS: In July, businesses increased their inventories by a moderate 0.4 percent while sales increased at the fastest pace in three months.

Solid gains in business sales should be giving businesses confidence to boost their restocking efforts to meet the rising demand.

Last week, the government reported that stockpiles held at the wholesale level rose 0.7 percent in August, more than double the 0.3 percent gain seen in July. But that gain in inventories came in a month when sales fell by 0.7 percent, the biggest decline at the wholesale level since January.

That would indicate that part of the rise in inventories was unwanted and occurred because businesses were unable to sell as much as they had planned. Such a development could cause businesses to cut back on their orders in coming months.

The report Wednesday will cover not just inventories held by wholesalers but also inventories held by manufacturers and by retailers.

Inventory growth is viewed as a barometer of business sentiment. When companies add to their stockpiles, it generally suggests optimism about future demand. But during a period of slowing sales, it can also reflect an unexpected slowdown that has left businesses saddled with unwanted goods.

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 .

That rebound followed a big slowdown in inventory growth in the first three months of the year that subtracted nearly 1.2 percentage points from growth. The economy contracted at an annual rate of 2.1 percent from January through March.