US business inventories up 0.4 pct in January, while sales plunge to lowest level in 4 months

WASHINGTON – U.S. businesses continued to restock their shelves and warehouses in January, but sales plunged during the snowstorm-plagued month.

The Commerce Department says inventories rose 0.4 per cent after a 0.5 per cent increase in December. But sales dropped 0.9 per cent in January after a 0.1 per cent decrease the previous month, putting sales back near September 2013 levels.

The report suggests that winter weather kept shoppers at home. But businesses anticipate a rebound because they expanded their inventories to meet expected demand in the months ahead.

Still, there is a possible danger to economic growth: When companies build their stockpiles as their sales fall, they may end up stuck with more goods than they need.

That potentially forces them to slash prices and sell at discounts in order to clear the extra inventory.