Tue, Mar 10 2009, 15:42 GMTUPDATE: US Wholesalers Cut Inventories Further In January
http://www.djnewswires.com/eu
(Adds analysis, details throughout; quotes from economist in fourth paragraph.)
By Jeff Bater
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- U.S. wholesalers reduced inventories in January but demand fell faster, suggesting further cutting and more pain for the slumping economy.
Wholesale inventories decreased 0.7% compared to the prior month, falling to a seasonally adjusted $424.23 billion, the U.S. Commerce Department said Tuesday.
Sales by wholesalers dropped 2.9% in January to a seasonally adjusted $326.15 billion. Because demand is falling faster than supply, a gauge within the inventory report indicated a growing excess of goods exists - an overhang that must be reduced. The inventory-to-sales ratio measures how many months it would take for a firm to deplete its current inventory. The ratio climbed to 1.30, up from 1.27 in December and is at the highest level since 1.30 in January 2002.
"As recently as June 2008, the inventory-to-sales ratio was at its cyclical and secular nadirs," Insight Economics analyst Steven Wood said. "Given the uncertainty surrounding the economic outlook and the recent sharp slowdown in retail spending, combined with the turmoil in the financial markets, there are still lots of unintended inventories that will need to be worked off."
Companies want to keep lean to avoid getting bogged under too much unsold merchandise. Reducing inventories signal production cuts, which, in turn, could mean layoffs and hurt the economy even more.
Recent data show industrial production dropped by 1.8% in January. The use of capacity among all industries shrank to 72%, the lowest rate in nearly 26 years as the recession prompts the idling of factories. Orders for long-lasting manufactured goods in the U.S. plunged 5.2%, with businesses slowing as consumers spend less, elevate savings and shun debt in fear of receiving a pink slip. The unemployment rate last month climbed to the highest since 1983 - 8.1%, up from 7.6%.
While an excess of inventory could weigh on GDP down the road, the 0.7% decline in January inventories held by wholesalers was smaller than the 1.0% decline expected on Wall Street. And it was smaller than any single-month drop during the fourth quarter of 2008, a signal wholesale inventories will add to gross domestic product in the first quarter of 2009. Such a boost, of course, would depend on inventory data still to be reported for February and March.
GDP is the broad measure of the U.S. economy, while inventories are a component of GDP. GDP tumbled by 6.2% in the fourth quarter of 2008, given just a hint of support by inventories, which fell - but by a smaller amount than they had in the previous, third quarter.
Tuesday's data showed January wholesalers' inventories of durable goods - meant to last three or more years - dropped 1.3%, after falling 1.5% in December. Automotive stocks plunged 4.8% as sales fell 6.7%.
Durable goods sales fell 6.5%, after going down 2.2% in December.
Non-durable goods inventories increased 0.2% in January. Petroleum stocks increased 12.4% as sales fell 3.5%.
January non-durable goods sales rose by 0.3%.
-By Jeff Bater, Dow Jones Newswires; 202-862-9249; jeff.bater@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=1HASTmRmi5LH7OUB%2F2uDgA%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
March 10, 2009 11:42 ET (15:42 GMT)
Wednesday, 11 March 2009
UPDATE: US Wholesalers Cut Inventories Further In January
Posts
