WASHINGTON (AP) — Businesses are likely slowing the pace at which they restock their warehouses, a trend that could hold back overall economic growth.
Robust inventory growth in the final three months of last year helped the economy expand at an annual rate of 2.8 percent — the best quarterly growth for 2011. But many economists say companies are now cutting back on building up their stockpiles after seeing consumer spending fizzle at the end of the year.
The Commerce Department will offer its first read on inventory growth in December when it reports on wholesale inventories and sales at 8:30 a.m. Thursday.
In November, wholesale stockpiles barely changed, while sales at the wholesale level rose 0.6 percent.
Wholesale stockpiles were up to $468.9 billion in November, 22.2 percent higher than the low point reached in September 2009.
Companies tend to build their inventories when they expect stronger sales. Economists believe businesses will keep building inventories in 2012. But they expect the pace to slow from the fourth quarter growth.
Consumer spending was flat in December and the savings rate increased. Wages failed to keep pace with inflation in 2011. If that trend continues, consumers could pull back even further.
Economists at JPMorgan Chase expect the overall economy will expand at a rate of around 2 percent in the first quarter.
Some economists are more hopeful after last week's government report on January hiring. Employers added 243,000 net jobs last month, the most since the spring. The unemployment rate fell to 8.3 percent, the lowest in nearly three years.
Still, 8.3 percent unemployment is painfully high. Nearly 13 million people remain unemployed. And one reason the unemployment rate has fallen for five straight months is that many people have stopped looking for work. The government only counts people as unemployed if they are actively searching for a job.
Stockpiles at the wholesale level 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 41 percent of the total.
The Commerce Department will release a more complete report next Tuesday on December inventories at all three levels.
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