American businesses increased inventories by 0.4 percent in March as total sales accelerated sharply following a February setback, the Commerce Department (search) reported Friday.

The March increase in the total amount of goods held on shelves and back lots followed a 0.5 percent gain in February. However, a portion of that inventory growth reflected an unwanted accumulation as sales fell a sharp 0.5 percent during February.

In March sales at all levels of business rebounded 0.7 percent, the best showing since a 1.2 percent sales jump in December. The increased sales helped to slow the growth in inventories. The 0.4 percent rise in inventories was slightly below the 0.6 percent increase that analysts had been expecting.

In other economic news, the Labor Department (search) reported Friday that the prices of imported goods rose by 0.8 percent in April, the slowest pace in three months. The slowdown reflected the fact that oil prices last month retreated from record highs. Import prices had surged by 2 percent in March, the largest gain in nearly 15 years.

Fears that the economy could be entering another period of significantly slower growth have eased somewhat in recent days as the government reported that job growth and retail sales rebounded sharply in April following weaker-than-expected readings in March.

Analysts believe that the initial 3.1 percent estimate for overall economic growth in the first quarter, the slowest performance in two years, will now be revised upward to 3.5 percent or even better. Part of that optimism is based on a report this week that the trade deficit, which subtracts from growth, narrowed significantly in March.

The report on business inventories showed that the overall 0.4 percent increase in stockpiles was led by a 0.6 percent rise in inventories held by manufacturers, the same increase for this group as in February. Inventories held by retailers rose by 0.3 percent, down slightly from a 0.4 percent gain in February. Wholesale inventories were up 0.4 percent in March, compared to a 0.6 percent rise the previous month.

The 0.7 percent gain in sales in March was led by a 1.3 percent jump in manufacturing sales, a big rebound after a 1.5 percent drop in February. Sales by retailers rose by 0.5 percent following a 0.6 percent February increase while wholesalers saw a small 0.2 percent sales increase in March which did not erase a 0.5 percent February decline.