Inventories Up 0.2% in Month; Sales Leap 1.5% : Analysts Say Firms May Boost Production

Business inventories rose a tiny 0.2% in November, while sales were soaring by 1.5%, the strongest increase since August, the Commerce Department reported Wednesday.

The combination of slow growth in inventories and strong sales represented a turnaround from the report in October, when sales fell a sharp 0.7% and inventories rose by 0.6%.

Analysts cautioned against reading too much into one month’s data, but they said that, if the November changes persist, then it is likely that U.S. manufacturers will see increased production in the future as businesses try to restock depleted shelves.

The inventory and sales figures were for November, but already the government has reported that sales at the retail level climbed a sharp 1.9% in December while unemployment was falling to a five-year low of 6.9%.

John Albertine, president of the American Business Conference, said the November inventory and sales performance was “entirely consistent with the scenario of year-end acceleration and growth.”

Small Increase

“I think that the power of the economy at the end of the year should give business more confidence and should result in some padding of inventories,” Albertine said.

The report said the 0.2% rise in inventories put stockpiles at a total level of $583.4 billion in November. It was the smallest increase in inventories since a 0.1% rise in September. The increase came almost entirely from growth in retailers’ inventories, which rose by 1.1% in November. Inventories held by manufacturers declined 0.2% while wholesale inventories were essentially unchanged.

The 1.5% sales gain, the strongest since a 1.9% rise in August, put sales in November at $432.3 billion. It was led by a 2.1% gain in sales by wholesalers followed by increases of 1.6% at the manufacturing level and 0.7% at the retail level.

The big rise in sales and the slight increase in inventories left the ratio of inventories to sales at 1.35, the lowest it has been since last August.

Albertine said he did not believe that inventory rebuilding would ever again approach the size of stockpiles held by businesses in the 1970s because most firms are now using computerized inventory management systems as a way of cutting costs.