WASHINGTON | Tue., Mar. 13, 2012 7:32am EDT (Reuters) -Small business confidence rose to a one year high in February as more owners reported plans to rebuild stocks after 56 months of inventory liquidation, hinting at a pick-up in domestic demand.

The National Federation of Independent Business said on Tuesday its optimism index increased to 94.3 last month - the highest reading since February 2011 — from 93.9 in January. It was the sixth consecutive month of gains.

Last month, 14% of the NFIB's 350,000 members reported an increase in inventories, up three points from January. The share of businesses still reducing stocks fell four points to 20% in February.

The figures are not adjusted for seasonal variations.

"This is good news for economic growth, as many firms will be ordering new inventory to satisfy customers who are gradually increasing in numbers," the NFIB said in a statement.

The NFIB survey adds to a list of data, including employment, to suggest the economy is now firmly in a self-sustaining growth phase.

Government data on Friday showed job growth exceeded 200,000 in February for a third straight month, with the unemployment rate holding steady at a three year low of 8.4%.

A build-up of inventories helped to boost gross domestic product in the fourth quarter.

Economists believe businesses have little appetite to add more stocks, which could see growth this quarter slowing from the fourth quarter's 3% annual pace.

In the NFIB survey, plans to increase inventories increased five points in February. The number of business owners reporting stocks were "too low" exceeded those viewing inventories as "too high."

"Overall, it appears that small business owners have reduced inventories to acceptable levels given the outlook for sales growth," the NFIB said.

In February, more business owners expected sales to increase than in January. While the survey found little signs of inflation, despite a spike in gasoline prices, one in five business owners plan to raise prices over the coming months.

(Editing by Andrew Hay)

© 2011 Thomson Reuters. Click for Restrictions.

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