AP News

Ahead of the Bell: US Business Inventories


WASHINGTON (AP) — U.S. companies likely restocked their shelves in July at a faster pace than the previous month, a trend that could boost economic growth.

Economists forecast that business inventories rose 0.3 percent in July, according to a survey by FactSet. That's up from 0.1 percent in June. The Commerce Department will release the report at 10 a.m. Eastern Friday.

Faster restocking would accelerate growth because it would likely require greater factory output.

Total business stockpiles rose to $1.58 trillion in June. That's 20 percent higher than the low reached in September 2009, when businesses were slashing inventories in response to the deep recession.

Companies typically boost their inventories if they anticipate rising sales in future months. But higher inventories can also become a problem if sales don't increase quickly enough. If sales slow, stockpiles could grow too large, causing companies to cut back their inventories. That would reduce production.

The economy has grown this year, but at a sluggish pace. It expanded at a 1.7 percent annual pace in the April-June quarter. That's down from 2 percent in the first quarter and 4.1 percent in the final three months of last year.

That's not fast enough to spur much hiring. Job gains have weakened recently after a strong start to the year. Employers added only 96,000 jobs in August, below the 141,000 added in July and far below the average gains of 226,000 in the first quarter.

The unemployment rate fell to 8.1 percent from 8.3 percent, but only because the number of people in the work force shrank.

On Thursday, the Federal Reserve said it would purchase $40 billion of mortgage-backed securities a month until the economy and job market steadily improve. Fed officials also said they would keep short-term interest rates low even after the economic recovery accelerates.

Wholesale stockpiles account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent.


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