Inventories Shrink 0.4% in First Drop Since June 1994

U.S. wholesale inventories unexpectedly dropped 0.4% in November, the first decline since June 1994, Commerce Department figures showed Friday.

The data suggest that businesses made progress in clearing warehouses of unsold goods at a time when demand at chain stores and other retailers has been lackluster.

“Wholesale inventories had been running high, so it does suggest some correction is taking place,” said Cynthia Latta, an economist at DRI McGraw-Hill in Lexington, Mass.

The progress may be short-lived, however. Poor holiday sales, bad weather and the government shutdown suggest “December is going to be a wild card,” Raymond Worseck, chief economist at A.G. Edwards & Sons, said before Friday’s report.

Analysts had anticipated an increase of about 0.5% in wholesale inventories during November.

Auto, furniture and industrial machinery inventories posted declines, as did a variety of nondurable goods such as farm products, petroleum and pharmaceuticals.

In October, inventories increased a revised 0.8%. Previously, the government estimated that inventories had increased 0.7% during October.

The last decline in wholesale inventories was a 0.1% drop in June 1994, a Commerce Department spokeswoman said. Inventories also fell by 0.4% in March 1994, she said.

Wholesale sales, meanwhile, rose 0.4% in November after increasing 0.1% in October.

The wholesale sales-to-stock ratio, which measures the time goods sit at wholesalers, fell to 1.35 months during November--the lowest since September--from 1.36 months in October.

Friday’s Commerce Department report was postponed by the partial shutdown of the government and the snowstorms that struck the nation’s capital in early January. The wholesale inventories trade report for December will be issued Feb. 15.