U.S. business inventories increased solidly in February, suggesting restocking could again contribute to economic growth in the first quarter.
Business inventories rose 0.5% after increasing 0.4% in January, the Commerce Department said on Thursday. Inventories are a key component of gross domestic product. February’s gain was in line with economists’ expectations.
Inventories fell 2.4% on a year-on-year basis in February.
Retail inventories were unchanged in February as estimated in an advance report published last month. That followed a ‐0.3% decline in January.
Motor vehicle inventories decreased fell 2.6% as previously reported. Motor vehicle stocks are dwindling as a global semi-conductor shortage hampers auto production.
Retail inventories excluding autos, which go into the calculation of GDP, increased 1.2% as estimated last month. That followed a 0.2% gain in January. Inventory investment has contributed to GDP growth for two straight quarters.
Growth estimates for the first quarter are as high as a 9.7% annualized rate. The economy grew at a 4.3% rate in the fourth quarter. Growth this year is expected to top 7.0% this year, which would be the fastest since 1984 and would follow a 3.5% contraction last year, the worst performance in 74 years.
Wholesale inventories rose 0.6% in February. Stocks at manufacturers jumped 0.8%.
Business sales fell 1.9% in February after rising 4.5% in January. At February’s sales pace, it would take 1.30 months for businesses to clear shelves, up from 1.27 months in January.