Business Inventories Increase as Consumer Spending Remains Strong

The growth in inventories at American businesses in April is the most recent indication that the U.S. economy is gaining momentum as winter gives way to spring.

After falling 0.2 percent in March, business inventories increased by a seasonally adjusted 0.2 percent in April, the Commerce Department reported on Thursday.

An earlier estimate of a 0.1 percent decline for the drop in March was revised downward.

The increase in April was in line with Wall Street's predictions. Notwithstanding gas station sales, retail sales in April increased strongly, increasing by 0.4%. The Commerce Department reported in a second report on Thursday that retail sales, excluding gas station purchases, were even stronger in May, increasing 0.6 percent.

Retailer and manufacturer inventories both increased by 0.1 and 0.5 percent, respectively. Wholesale inventories decreased by 0.1%.

Business inventory was up 5.2 percent from a year ago.

Increasing company confidence in consumer spending and a readiness to finance larger stocks of goods despite rising interest rates are likely the causes of the increase in inventories.

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