Wednesday, January 15, 2003

WASHINGTON, Jan. 15 (UPI) — The Commerce Department on Wednesday reported that U.S. business inventories climbed for a seventh consecutive month in November, supported by stock building in the automobile industry as dealers replenished stocks from strong auto sales over the summer.

The government agency said U.S. business inventories rose 0.2 percent in November to a seasonally adjusted level of $1.136 trillion following a revised 0.1-percent gain in October. October’s inventories were previously estimated as a 0.2-percent increase.

Economists on Wall Street were expecting inventories to rise 0.1 percent during November.

The level of inventories in relation to sales is an important indicator of the near-term direction of production activity.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. Rising inventories can be an indication of optimism that sales will be growing in the coming months. By looking at the ratio of inventories to sales, investors can see whether production demands will expand or contract in the near future.

Although business inventories have climbed for several months, during the past three months the gains have mostly been a result of restocking by the auto industry, suggesting the rest of the economy wasn’t as strong.

Analysts say businesses likely won’t significantly add to their stocks until it becomes clear the U.S. economy is growing at sustained, healthy pace.

The latest report from the Commerce Department showed the inventory-to-sales ratio, a gauge of the time goods sit on store shelves, held steady at 1.36 months.

The report showed that business sales grew 0.3 percent during November, down from the 0.5 percent pace recorded in October.

Retail inventories, the source of new information in the report, rose by 0.8 percent in November. Excluding autos, retail inventories would have risen by 0.5 percent.

The rise in retail inventories was led by a 1.7 percent rise in autos and parts and a 1.8 percent gain in inventories at department stores, which were then getting ready for the holiday-shopping season.

Inventories at furniture and home furnishings businesses were up by 0.3 percent while inventories at clothing stores increased by 0.7 percent. Food and beverage inventories rose by 0.6 percent during the month.

Wholesale inventories rose 0.2 percent in November after falling 0.5 percent in October. Sales rose 1.2 percent, after no change during the previous month.

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