Inventory-to-sales ratio lowest since March 2000
By Rachel Koning, CBS.MarketWatch.com
Last Update: 8:37 AM ET Dec. 14, 2001
WASHINGTON (CBS.MW) - U.S. retailers, manufacturers and wholesalers all trimmed their inventories significantly in October, a process that could spur production in coming months.
October business inventories fell a record 1.4 percent to $1.16 trillion, the Commerce Department said Friday. Economists surveyed by CBS.MarketWatch.com expected inventories to be reduced 0.8 percent that month.
Sales rose a record 2.7 percent to $830 billion in October.
Both records are based on data collected only since early 1992 when the government changed its statistical process.
The inventory-to-sales ratio, which measures just how fast businesses move merchandise from the shelf to the door, stood at 1.39 in October. The October ratio matches a low last seen in June 2000 and is the lowest since 1.37 in March of that year. The lower the number, the shorter the time merchandise remains in the store or warehouse.
Factories reduced inventories 0.4 percent in October, while retailers slashed their stock by 2.8 percent and wholesalers cut back by 1 percent.
The largest inventory reduction was seen at the nation's auto dealerships and parts stores, where supplies tumbled nearly 9 percent, also a record since this data series began.
Previous reports showed a flurry of car, SUV and truck buying that month thanks largely to deep discounting and zero-financing incentives.
Retail sales data for November released earlier this week revealed the torrid pace of auto sales in October was not carried over to November, when sales for most dealerships in fact fell.
All told, inventory reduction across the board is viewed by most as an encouraging sign for the economic recovery many are expecting sometime next year.
The Federal Reserve this week cut its key lending rate for an 11th time this year and signaled it may reduce rates again next month if necessary to ensure healthier growth next year.
Rachel Koning is a reporter for CBS.MarketWatch.com in Washington.
