Sales by manufacturers, wholesalers and retailers fell for a third straight month in January, and inventories of unsold goods grew, the Commerce Department reported Thursday.
It was the first time since the third quarter of 1984 that sales had fallen three months running. The trend indicated that the economy was mired in recession as the year began.
The Commerce Department said sales in January fell 1.2% to $523.6 billion after declining 1.5% in November and 2.4% in December. It was the first time sales had dropped three consecutive months since July, August and September, 1984.
The revised December drop was worse than the 2.3% fall first reported. The 2.4% drop was the steepest since sales plunged 3.1% in January, 1987.
Inventories advanced 0.4% to $814.4 billion after dropping 0.6% in December. They had edged up 0.2% in November.
January’s inventory-to-sales ratio was 1.56, meaning that it would take 1.56 months for businesses to clear their shelves and back lots at the January sales pace.
In past recessions, major production cutbacks and job layoffs have occurred as businesses attempted to sell off their swollen backlogs. The inventory-to-sales ratio had risen as high as 1.75 during the recession of 1974-75 and 1.74 during the 1981-82 downturn. The ratio averaged 1.49 last year.
“It’s still under control,” Kris Bledowski of Cahners Economics in Newton, Mass., said of the ratio. “With sales weak across the board, we have to expect inventories to rise as well, but the ratio is manageable.”
Many economists expect sales to pick up this spring, fueling a mild turnaround in the economy.
Thomas Runiewicz, an economist with the WEFA Group in Bala-Cynwyd, Pa., said sales would remain sluggish in February but pick up in subsequent months.
“January and February may well be the low point of these numbers,” he said. “We’ll see a little more optimism in March and going into the spring.”
In fact, the Commerce Department reported Wednesday that retail sales started to pick up in February. Their 0.8% gain was the first advance in four months. Analysts viewed the report as evidence that the recession may have bottomed.
January retail sales had slumped 1.4% after declining 1.8% the previous month. Sales on the wholesale level dropped 2.8% after sliding 0.7% in December. Manufacturing sales were unchanged after a 3.9% drop a month earlier.
Inventories on the retail level rose 0.7%, nearly wiping out a 0.8% decline in December.