November Sales Keep Step With Inventories, Easing Fears of Buildup

Business inventories rose 0.4% in November and sales increased at the same pace, the government said Tuesday in a report that analysts said bodes well for the nation’s economy in the new year.

The Commerce Department said inventories held on shelves and back lots rose to a seasonally adjusted $753.6 billion in November, while sales reached $503.8 billion.

The matching 0.4% gains kept the ratio of inventories to sales at 1.50, meaning it would take 1.5 months to exhaust inventories at the November sales pace.

When not accompanied by increasing sales, rising inventories can signal economic weakness because they may lead manufacturers to order production cuts and layoffs while they sell off reserve goods.

But John Hagens of WEFA Group in Bala-Cynwyd, Pa., said the new report indicates that “at least from the inventories point of view, we think the economy is in pretty good shape for continued growth in 1989.

“Oftentimes, before a recession, inventories tend to build up. There’s no evidence of any kind of excesses in inventories in the economy.”

A Positive Sign

The November increase in inventories followed a minuscule rise in October and a 0.9% jump in September. It was the 23rd straight month in which inventories had risen, but sales generally have kept pace.

“It looks like inventories closed out the year on a very lean note, which should be a positive sign in terms of growth in the first half of this year,” said Michael Evans, a forecaster in Washington. “People remained somewhat skeptical about the durability of the recovery. They kept their inventories rather lean.”

The monthly increase in sales was down from a 1.3% increase in October and virtually unchanged sales activity in September.

The November sales gain was led by a 0.9% rise at the retail level, followed by a 0.5% increase at the manufacturing level. These two gains offset a 0.4% decline in sales at the wholesale level.

The government last week reported that retail sales in December rose a lackluster 0.2%.

The increase in inventories was led by a 0.7% rise in retailers’ inventories, followed by a 0.4% increase for manufacturers and virtually no change in wholesale stockpiles.