Retail Sales, Business Inventories Rise Sharply

By John S. McClenahen Suggesting the U.S. economy has been much stronger than generally believed, retail sales in March rose 1.8% to $333.012 billion, more than twice the 0.7% increase economists were forecasting, the U.S. Commerce Department reported April 13. Even excluding auto sales, retail sales gained 1.7% last month, again more than twice the 0.7% economists expected. The new numbers seem to add credibility to forecasts for first-quarter 2004 GDP growth at an annual rate of 5%. The Commerce Department is slated to publish its first estimate of first-quarter growth on April 29. About one percentage point of March's gain in retail sales was attributable to a 10.6% increase in sales of building materials, which in turn was a product of warm weather, notes UBS Investment Research. However, "a return to more typical weather could unwind much of this strength in April," it cautions. The Commerce Department also reported on April 13 that business inventories at the end of February were $1.195 trillion, 0.7% higher than at the end of January and well above the 0.5% increase that economists generally expected. "Inventories in February outpaced expectations as retailers, principally auto retailers, built inventories. The stock building appears to be intentional, as inventory-to-sales ratios remained steady at 1.33," says UBS.

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