U.S. business sales increased 1.4% in April - - the fastest pace in five months - - outpacing inventory growth and leaving businesses with small inventory levels, the U.S. Commerce Department announced Thursday.

Sales have increased 6.8% since April 2007.

Meanwhile, inventories increased a modest 0.5% in April, above the 0.3% consensus estimate of economists surveyed by Bloomberg News. Inventories have increased 5.4% since April 2007.

Further, the April business inventory-to-sales ratio declined to 1.25, with the typical company now possessing about a 38-day supply of goods in storage/inventory rooms. A year ago, in April 2007 the inventory-to-sales ratio was 1.27.



Economist David H. Wang told BloggingStocks Thursday the April inventory data has both positive and negative dimensions.

On the one hand, businesses are keeping inventories at a bare minimum - - a fact that typically is bearish, short-term, for the U.S. economy, as it could reflect a lack of business confidence in the economy's ability to create demand for products, Wang said. "No business wants to be caught with a lot of inventory purchased that they cannot sell," he said. "The last thing you want at, say, an appliance company, is 200 refrigerators and kitchen ovens you can't sell."

On the other hand, those same lean inventories mean that any sustained increase in demand will require businesses to ramp-up production quickly - - a condition that generally limits the length of a recession / economic downturn, Wang said. "Lean inventories can lead to a leap in growth, once that demand picks up," he said. "If the economy displays consumer demand, it will quickly deplete low inventories, requiring re-stocking, which requires and increase in production, increasing GDP growth."