Inventories Rise, but Sales Hike Cools Recession Fear

Business inventories rose 0.6% in April, but the buildup was outpaced by a 1.7% increase in sales, the government said today.

The Commerce Department said inventories held on shelves and backlots climbed to a seasonally adjusted $769.8 billion in April after a 0.3% rise in March.

Business sales, meanwhile, increased to a seasonally adjusted $516.3 billion after holding steady in March. March’s flat sales followed a 0.9% plunge in February, the sharpest fall since January, 1987.

The April business activity produced a decrease in the ratio of inventories to sales. It was 1.49, meaning it would take 1.49 months to exhaust inventories at the April sales pace. The ratio stood at 1.51 in March and 1.50 in February.

When not accompanied by increases in sales, rising inventories could threaten a recession by prompting manufacturers to cut back production until inventories are sold.

Inventory accumulation in April was led by a 0.8% increase at the retail level, where sales were the weakest. Manufacturing inventories, which represent about 47% of the total, were up 0.6%, and wholesale inventories edged up 0.1%.