US businesses cut stockpiles in April

WASHINGTON – U.S. businesses decreased their stockpiles in April by the largest amount since October, while sales were flat.

Business inventories fell by a seasonally adjusted 0.2 per cent in April, following March’s gain of 0.2 per cent, the Commerce Department said Wednesday. It was the first decline since a 0.2 per cent drop in October. Sales were flat after contracting 0.1 per cent in March.

Economists had expected a slight decline in April inventories. But many remain confident that inventory growth will rebound and help support overall economic growth in the current quarter.

When businesses increase stockpiles, it is generally seen as a sign of their confidence that sales will increase in the coming months. A decrease in inventories can be a sign of pessimism about future sales.

Economic growth as measured by the gross domestic product slowed in the January-March quarter, in part because inventories subtracted from overall economic activity. Annual GDP growth was just 1.2 per cent in the first quarter. But economists think second quarter GDP growth will strengthen significantly.