Dec. Business Inventories Fall .2%, First Drop in Year

Business inventories fell 0.2% in December, the first drop in more than a year, but business sales were flat during the month, the government said today.

The Commerce Department said inventories declined to a seasonally adjusted $795.2 billion after a 0.5% increase in November. Inventories in the final month of 1989 were 5.6% above those posted during the same month of 1988.

The December decline was the first since a 0.1% drop in October, 1988, and the largest since inventories fell 0.6% in December, 1986.

If inventories were to pile up excessively, it could mean cutbacks in production and a loss of jobs--a situation already found in the automobile industry.

Chrysler Corp., Ford Motor Co. and General Motors Corp. all experienced temporary layoffs in January to reduce the number of vehicles stuck on back lots.

Inventories often rise during periods of slow economic growth as output exceeds demand.

Business sales, meanwhile, held steady at $522.5 billion after rising 0.4% in November. They increased 3% over sales in December, 1988.

The result in December business activity produced a slight decline, to 1.52, in the ratio of inventories to sales. That means that it would take 1.52 months to exhaust inventories at the December pace. The ratio was 1.53 in both October and November.

But many economist do not feel the ratio is at a dangerous level yet.