US business stockpiles rise in December, but sales fall

WASHINGTON – U.S. businesses boosted their stockpiles slightly in December, as sales dropped sharply. This combination has stoked anxieties about weakening economic growth, as sales over the entire year dropped for the first time since the Great Recession.

The Commerce Department said Friday that December business inventories rose a seasonally adjusted 0.1 per cent, after having slipped 0.1 per cent in November. Both manufacturers and retailers — which were responding to holiday shopping — increased their stockpiles.

But sales fell 0.6 per cent in December, with a stiff 1.4 per cent drop in manufacturer revenues accounting for much of the drop. Retail sales were nearly unchanged.

For all of last year, business sales fell 2.4 per cent last to $15.8 billion, the first decline since 2009 when the economy bottomed out during the Great Recession.

The figures suggest that businesses are struggling to sell off their inventories, a potential sign of lower demand and excess supply that signals slowing growth. Still, strong hiring levels have warded off fears of a downturn.

The inventory-to-sales ratio has risen to 1.39 from 1.33 a year ago, evidence that products are lingering on store and warehouse shelves. December recorded the highest inventory-to-sales ratio since May 2009.

Economic growth cooled noticeably during the final three months of 2015. The economy expanded at an annual rate of just 0.7 per cent during the October-December quarter, down from a 2 per cent pace the prior quarter.

A global slowdown as weighed on U.S. manufacturers and the stock market. China faces challenges with a downshift in growth and high debt levels, while growth across the eurozone was a tepid 1.5 per cent last year. The rising value of the dollar has hurt U.S. exports, while the declining oil prices have squeezed energy firms and the factories that supply them equipment.