WASHINGTON – U.S. companies, keeping a close eye on the economic recovery, whittled excess stocks of unsold goods in April for the 15th straight month.
The Commerce Department reported Friday that stockpiles of unsold goods on shelves and back lots dipped by a seasonally adjusted 0.2 percent in April. That pushed the value of inventories down to $1.11 trillion. the lowest level in more than two years.
The drop in inventories was helped out by a 1.8 percent increase in businesses' sales, the largest sales gain since October.
As inventories get lean, factories have been boosting production to replenish stocks, something that is helping along the recovery.
Inventories began piling up as the economy slowed and then fell into recession last year. To pare down excess stocks, companies heavily discounted merchandise, offered free-financing and other incentives and factories throttled back production.
In March, inventories fell by 0.4 percent, aided by a 0.4 percent advance in sales.
The economic recovery is moving ahead at a modest pace, but improvements have been spotty, the Federal Reserve said earlier this week in a survey of business conditions around the country.
Against this backdrop, many economists believe the Fed will leave short-term interest rates — now at 40-year lows — unchanged at its meeting later this month and probably into the summer.
Low interest rates should motivate consumers — the engine of economic growth — to spend and businesses to step up investment in new plants and equipment, forces that would bolster the recovery.
The vitality of the recovery will be affected by the behavior of both consumers and businesses in the coming months.
Consumers — put off by unusually cold weather in May — cut back on their spending that month and drove down sales at the nation's retailers, a government report released on Thursday showed. Economists are hopeful consumers will keep their pocketbooks and wallets open, but there are still concerns about how much energy shoppers will display.
Businesses, meanwhile, have been reluctant to made big commitments — such as new capital investment and hiring workers — until they are assured that the recovery is here to stay, economists say.