WASHINGTON – Businesses' stockpiles of unsold goods rose in February as sales tumbled amid prewar jitters. But more forward-looking economic data suggest that consumers' haven't lost their appetite to spend -- encouraging news for businesses and the economy.
The Commerce Department reported Monday that business inventories went up by 0.6 percent in February, compared with a 0.3 percent rise in January.
Businesses' sales, meanwhile, dropped by 1 percent in February, the biggest decline since November 2001. That erased part of January's sizable 1.3 percent gain.
The report highlighted one of the big challenges facing businesses during these muddled economic times: trying to gauge consumers' demand for their products.
The Business Roundtable, an advocacy group of chief executive officers from some of the United States' largest companies, in a survey last week found that consumers' uneven appetites for spending is among their top concerns.
Even with their ups and downs, consumers have been the main force keeping the economy going.
Profit-pressed businesses and battered manufacturers have been reluctant to make big investments in capital projects or in hiring, a major factor holding back the economic recovery. Turning that situation around may take time, even with a swift military victory in Iraq, some economists say.
The Federal Reserve in March decided to keep interest rates at a 41-year low of 1.25 percent in a bid to help energize the listless economy. Some economists believe the Fed is likely to keep rates at that low level, especially given last week's surprisingly strong retail sales report.
Consumers snapped out of a funk in March and splurged on cars, garden supplies and furniture, sending retail sales up by the largest amount in 17 months. Another report last week showed that consumers' confidence in the economy improved in April.
Those reports raised hopes that consumers will keep their wallets and pocketbooks sufficiently open to prevent an economic slide into recession.
And, those reports made economists more hopeful that businesses might be adding more aggressively to their inventories going foward if they see sales picking up.
Fed Chairman Alan Greenspan and his colleagues are hopeful that once the war in Iraq is over the economy will get back on surer footing.
With the war appearing to wind down, economists' focus is back on trying to get a feeling for the economy's true fundamentals. That picture has been blurred by the uncertainties of war.
In Monday's report, inventories at factories rose 0.4 percent in February as sales slid by 1.5 percent.
Retailers saw inventories go up by 0.9 percent in February, the largest increase since September 2002, as sales dropped by 1.5 percent. At wholesalers, inventories rose 0.3 percent even as sales increased by 0.5 percent.
Since falling into recession in 2001, the economy has been struggling to back fall to full throttle. A quarter of strength has been followed by three months of weakness, an environment that has made it difficult for companies to make big financial commitments.