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UPDATE 1-U.S. wholesale inventories in record fall

Published 04/08/2009, 10:21 AM
Updated 04/08/2009, 10:24 AM

(Adds durables, sales information and reaction)

By Lisa Lambert

WASHINGTON, April 8 (Reuters) - U.S. wholesale inventories plunged a record 1.5 percent in February, more than double Wall Street's forecasts, while sales gained 0.6 percent, the Commerce Department said on Wednesday.

Analysts polled by Reuters had expected inventories to fall 0.7 percent, after a 0.9 percent drop the previous month. Stocks at wholesalers have now dropped for six straight months. The Commerce Department's current methods for recording inventory data began in 1992.

"The market bounces from one data point to another, but in terms of the general mosaic, it'll be looked at as a good barometer of consumption," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

Inventories of durable goods, those long-lasting items such as metals and furniture, also dropped a record 2.4 percent, while their sales rose 2 percent. Nondurable inventories were down a much slimmer 0.2 percent.

February was the first increase in wholesales sales since June 2008, when they rose 2.3 percent. The department said sales of motor vehicles and their parts were up 3.7 percent, while petroleum sales fell 3.7 percent.

The inventories-to-sales ratio, or the pace it would take to deplete current stocks, was 1.31 months' worth in February, faster than January's 1.34 months'. The January ratio was the largest since June 2001.

"The only thing that tempers the report is that the sales-to-inventory ratio is still high," said Christopher Low, chief economist at FTN Financial in New York. He added the decline in inventories "will take a bite" from gross domestic product. (Additional reporting by Ryan Vlastelica and Richard Leong in New York, Editing by Neil Stempleman)

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