THE ECONOMY : Business Sales Rise 1.7%, Outpace Inventory Gain

Business sales rose 1.7% in April, making their steepest gain since March, 1988, and far outpacing a 0.6% jump in inventories, the government said Wednesday.

Analysts expect sales to soften but say they see no sign of any dangerous buildup in stockpiles.

“We find very little evidence of any excess stocks, and I think that’s good news for the economy because it lessens the risk of recession as we move forward,” said economist Lawrence Chimerine of the WEFA Group in Bala-Cynwyd, Pa.

Rising inventories, if not accompanied by increased sales, could threaten a recession by prompting manufacturers to cut back production until excess stocks are sold.

But the ratio of inventories to sales dropped in April to 1.49, meaning that it would take 1.49 months to exhaust inventories at the April sales pace.

Neither Chimerine nor Bruce Steinberg, senior economist for Merrill Lynch, considers that a troublesome level.

“So far in this business cycle, inventory behavior has been encouraging in that it has not become excessive,” Steinberg said. “Whether that continues to be the case remains to be seen but, at least at this point, there really aren’t any serious areas of excess.”

The Commerce Department reported that sales rose to a seasonally adjusted $516.3 billion in April after holding steady in March. The gain was the steepest since sales rose 1.8% in March, 1988.

Inventories on shelves and backlots climbed to a seasonally adjusted $769.8 billion after a 0.3% rise a month earlier, the department said. That was the highest since a 0.8% gain in January.

Steinberg said much of the sales gain was price-related and added, “I wouldn’t read too much into the sales number.”