WASHINGTON — Business inventories were basically flat in January even though sales rose for an eighth consecutive month.
The Commerce Department said Friday that inventories were unchanged, a weaker reading than the 0.2 percent gain that analysts had expected. Total business sales rose by 0.6 percent, a solid performance that followed an even stronger 1 percent gain in December.
Economists are hoping that businesses will soon start restocking depleted store shelves on a sustained basis, a move that would give a boost to the economic recovery.
The flat reading on inventories followed a 0.3 percent drop in December, which was larger than the 0.2 percent decline previously reported.
Inventories posted gains in October and November following a string of 13 straight declines, the longest stretch of weakness since inventories fell for 15 straight months in 2001 and 2002 as the country was struggling to emerge from the 2001 recession.
The flat reading in January came from a 0.2 percent increase in inventories held by manufacturers and declines of 0.1 percent in retail inventories and 0.2 percent in wholesale inventories.
Wholesalers hold 25 percent of all inventories with factories holding about one-third and retailers holding the rest.
The ratio of inventories to sales dipped to 1.25 in January, meaning it would take 1.25 months to exhaust inventories at the January sales pace. The figure had been 1.26 in December and stood at 1.46 in January 2009.
The 0.6 percent rise in total business sales was an encouraging sign of rising demand. In a separate report, the Commerce Department said Friday that sales at the retail level were also up in February, increasing by a better-than-expected 0.3 percent.
Economists are hoping that sustained gains in sales will convince businesses to ramp up their ordering. That would trigger increased factory production and provide support for the fledgling recovery.
Businesses slashed inventories during the recession as they struggled to control costs in the face of a deep economic downturn and falling demand for their products. But the economy got a boost in the final three months of last year from a slowdown in the inventory liquidation process.
The swing from inventory reductions contributed two-thirds of the economy’s overall growth of 5.9 percent in the October-December period. Economists are now hoping to see the beginning of sustained inventory rebuilding.
Kevin Jones of The Trucker staff can be reached for comment at email@example.com.
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