U.S. Business Inventories Fall 0.4% in February.

Business inventories fell in February for the second time in three months while sales surged, the government said today in a report signaling some rebound in the economy.

Inventories on shelves and backlots fell 0.4%, the steepest drop since December, 1986, to a seasonally adjusted $794.6 billion in February, the latest month for which figures are available, the Commerce Department reported.

Sales, meanwhile, rose 1.3% to a seasonally adjusted $535.4 billion. It was the largest increase in seven months. All of the strength came in manufacturing, the sector of the economy that had been most affected by sluggishness resulting from the Federal Reserve Board’s high interest rate policy.

A month earlier, business sales rose a modest 0.4%, while inventories increased 0.3%.

The combination of surging sales and falling inventories is a sign of economic strength. A buildup in inventories, on the other hand, can be a warning of recession. Retailers and wholesalers with too many goods on hand cut orders. Factories then crimp production and lay off workers.