US business inventories rise as sales slow

U.S. businesses restocked their inventories at a faster pace in December, but sales slowed, the government reported Thursday, adding to evidence that the economy is moderating after a strong second half of 2013. The Commerce Department said business inventories rose 0.5 percent, following a 0.4 percent advance in November. Sales growth declined to 0.1 percent from 0.7 percent the previous month. Retail inventories rose 0.6 percent in December, while sales were flat. Manufacturers and wholesalers increased their inventories by a smaller amount. Manufacturing sales fell, while wholesale sales rose at a slower pace than in November. The figures point to a risk for the economy. If companies build their inventories at a faster pace than their sales growth, they may end up with too many goods, which would force them to cut prices sharply and sell at discounts in order to clear the extra inventory. Businesses also would order fewer goods, reducing manufacturing production. Strong inventory gains last autumn helped overall economic growth in the second half of 2013, contributing 40 percent of the third quarter's strong 4.1 percent annual growth rate. Rising inventories also contributed 0.4 percentage point to the fourth quarter's 3.2 percent growth. But less inventory restocking likely will slow economic growth in the January-March quarter to about 2 to 2.5 percent, economists forecast.