Wholesale Inventories Fall In January
Even as sales rose for the 10th consecutive month, businesses in the U.S. cut wholesale inventories again in January, despite a prediction by analyst for a slight increase.
The Commerce Department said on Wednesday that in January inventories at businesses were trimmed 0.2 percent after a 1 percent drop in the previous month, which was revised from a previous reading of a 0.8 percent decline. Sales were up by 1.3 percent in the first month of 2010.
Economists had been expecting a 0.2 percent increase in inventories for January, but with the drop, the ratio of inventories to sales fell to a record low of 1.10, meaning it would take 1.10 months to deplete inventories at the current sales pace.
The steady gains in sales have economists hopeful that a sustained rebound in inventory levels will soon follow, as businesses liquidated inventories during the recessions to combat the drop in consumer spending to control costs.
Sustained inventory increases would spur factory production and help to stabilize the economic recovery. The economy saw a boost in the final three months of 2009, when the liquidation of inventories slowed
In January durable goods inventories fell 0.5 percent, while automotive stocks dropped 0.2 percent. Nondurable goods inventories increased 0.3 percent, with petroleum inventories surging by 4.7 percent.
In the U.S., wholesalers hold 25 percent of total inventories, while factories hold about one-third and retailers possess the rest.
The slowdown in massive inventory reductions contributed two-thirds of the overall gross domestic product growth of 5.9 percent in the fourth quarter of 2009.
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