Wholesalers make large inventory cuts as their sales plunge a record 4.1% in October

Wholesalers cut back on their inventories in October by the largest amount since the period after the 2001 terrorist attacks while they watched their sales plunge by a record amount.

Analysts predict more grim news in the months ahead as the recession deepens.

The Commerce Department reported Wednesday that wholesalers, the companies in the supply chain between manufacturers and retailers, reduced inventories 1.1% in October, the biggest cutback since a similar drop in November 2001.

The inventory decline was much bigger than the 0.2% decrease economists expected.

Sales at the wholesale level plunged 4.1% in October, the largest decline on record.

The inventories-to-sales ratio increased to 1.16 in October, up from 1.12 in September. That means that it would take wholesalers 1.16 months to sell their stockpiles at the current sales pace.

It was the highest inventory-to-sales ratio since a similar level in February 2007 and was another warning signal of potential production cutbacks in coming months as businesses try to get their inventories back in line with slowing sales.

The declines in inventories and sales provided further evidence that the economy is in a steep recession. Many analysts believe that the recession, which has already lasted 12 months, will drag on until the middle of next year. If it lasts past April, it will become the longest recession in the post-World War II period.