
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 15, 1991                   TAG: 9103150160
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

INVENTORIES UP

Business sales slackened 1.2 percent in January, helping to swell inventories by 0.4 percent, the government said Thursday. But analysts said the resulting 1.56 inventory-to-sales ratio, the widest in 6 1/2 years, still was not dangerously high or sharp enough to prompt widespread layoffs.

The Commerce Department said sales in January fell to $523.6 billion after declining 2.4 percent in December and 1.5 percent in November. It was the first time sales have dropped for three consecutive months since July through September 1984.

Inventories advanced to $814.4 billion after dropping 0.6 percent in December. They had edged up 0.2 percent in November.

The difference produced the 1.56 inventory-to-sales ratio, meaning it would take 1.56 months for businesses to clear their shelves and back lots if sales continued at January's pace.

In past recessions, large backlogs have caused major production cutbacks and job layoffs as businesses tried to sell off their inventories. It had risen as high as 1.75 during the severe recession of 1974-75 and 1.74 during the 1981-82 downturn. The ratio averaged 1.49 last year.

"It's still under control," said Kris Bledowski of Cahners Economics in Newton, Mass. "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."

Inventories on the retail level rose 0.7 percent, nearly wiping out a 0.8 percent decline in December. Wholesale backlogs, which were unchanged in December, gained 0.9 percent. Factory inventories held steady after dropping 0.8 percent a month earlier.

by CNB