U.S. business inventories rebounded in April from a decline the previous month, reflecting in part a significant rebound in retail inventories.
The Commerce Department reported Thursday that inventories held by manufacturers, wholesalers, and retailers grew 0.3% month-on-month after slipping 0.1% in March. The increase was in line with economists’ expectations.
Retail inventories increased 0.5% in April following a 0.7% drop in March. The April gain, which was driven by auto dealers and general merchandise stores, had been previously reported as 0.6%.
The report also showed that retail inventories excluding autos, a key component of U.S. gross domestic product, grew 0.4 %, down from the advance estimate but up from the 0.6% drop in March.
The “slight downward revision to retail stocks excluding motor vehicles suggested inventory investment’s contribution to second-quarter economic growth could be modest,” Reuters said.
“Inventory investment added just over one-tenth of a percentage point to the economy’s 2.2 percent annualized growth pace during the January-March period,” it added. “Economists expect the pace of inventory accumulation to remain moderate in the second quarter.”
Manufacturing inventories increased 0.3% in April after rising 0.2% in March, while wholesale inventories inched up 0.1% after a 0.2% gain the previous month.
The Commerce Department also said business sales rose 0.4% in April following a 0.6% increase in March. Wholesale sales led the way, climbing by 0.8% in April, while retail sales rose 0.4%.
Michael Feroli, U.S. economist at JPMorgan Chase, said the retail sales numbers put overall GDP on course for a “boomy” 4% growth rate in the second quarter.
After a sluggish start to the year, “U.S. households are back to their free spending ways,” Paul Ashworth, economist at Capital Economics, told The Financial Times.