P.M. BRIEFING : Business Inventories Dip 0.7%

Business inventories fell 0.7% in December, the first decline in six months, the government said today. It also reported a 2.3% decline in business sales, the second consecutive monthly drop.

The report combined good and bad news. The sales decline underscored the economy’s weakness. However, the reduction in inventories suggested that businesses have prepared for tough times.

When businesses are caught unprepared for a slump, inventories of goods held on shelves and backlots often soar unexpectedly. This can deepen an economic downturn because businesses order production cutbacks and job layoffs until inventories are sold.

The Commerce Department said inventories totaled a seasonally adjusted $810.7 billion in December. The 0.7% decline followed increases of 0.2% in November and 0.4% in October.