Commerce Dept: Inventories Shrink, Sales Rise

U.S. wholesale inventories fell by record rate in February, the Commerce Dept. announced Wednesday, suggesting that businesses are beginning to get a handle on the glut of unsold goods that is holding down production.

At the same time, sales of wholesale goods rose slightly, the first monthly increase since last June. Taken together, the two indicators suggest that excess goods are finally being drained out of the economy, suggesting that production may begin to rebound later this year.

Wholesale inventories fell a seasonally adjusted 1.5 percent in February, , to $419.3 billion, more than twice what analysts had expected and the largest monthly decrease since Commerce began tracking the data in 1992. Wholesale sales rose by 0.6 percent, to $319.7 billion, following a 2.4 percent decrease in January.

Another encouraging sign came in the beleaguered automotive sector, where bloated inventories of vehicles, parts and supplies declined 7.9 percent in February, while sales increased by 3.7 percent.

The news comes on the heels of a previous Commerce Department report last week that new orders for manufactured goods increased in February as well, following six months of consecutive declines. Orders for durable goods rose 3.5 percent, to a total ot $164.7 billion, up from a 7.8 percent decrease in January. New orders for nondurable goods increased $0.5 billion, or 0.3 percent, to $187.4 billion.

Orders for durable goods are considered a important economic indicator, as they reflect long-term business investments. Even so, the overall economic picture remains grim: February's wholesale sales figures still remain nearly 15 percent below those of a year earlier. Industrial production fell by 1.4 percent, with only 70.9 percent of industrial capacity utilized, the lowest level since recordkeeping began in the late 1960s. With the nation shedding another 663,000 non-farm jobs in March, it would appear that the economy still has a ways to go before things can be said to be looking up.