Businesses’ inventories are bursting at the seams, and that could spell bad news for suppliers – and the economy as a whole. That’s the view from the Commerce Department, which recently published its latest report on business inventories Tuesday (April 14).
According to the report, inventories within businesses rose slightly more than what was expected in February, signaling weak sales and threatening a slowdown of procurement from suppliers. Experts had predicted inventories to rise by 0.2 percent, though the Commerce Department said they rose by 0.3 percent after remaining steady in January.
Retail inventories, which rose by 0.2 percent in January, spiked by 0.5 percent in February, reports said. The data means that if this pace continues, it would take about 1.36 months for businesses to sell out of their stock, the Commerce Department found.
Weak sales may be attributed in part to harsh weather seen throughout the U.S. this past winter. According to statistics, the weather led to a half-percent drop in economic growth for the first quarter of 2015 and, in February, caused a drop in annualized GDP growth rate to 1.5 percent. Inventory levels play a crucial role in determining GDP.
More recent reports were not much more optimistic. The latest data from RetailNext revealed a downturn in retail foot traffic. That, combined with an already overflowing inventory, may discourage businesses and retailers from procuring more goods from their suppliers, experts said.
The harsh weather and discouraging numbers could exacerbate the already difficult task of managing inventory for businesses. Last month, Peoplevox CEO and Founder Jonathan Bellwood spoke with PYMNTS about the challenge of warehouse management, an area that needs innovation to aid swift and coordinated clearing and restocking of inventory levels.
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