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

DATE: SATURDAY, April 13, 1991                   TAG: 9104130174
SECTION: BUSINESS                    PAGE: A-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

INVENTORIES GO DOWN; SALES REBOUND

Business inventories notched down 0.2 percent in February as sales bounced back from their first three-month decline in nearly seven years, the government said Friday.

The Commerce Department also said business sales were up 0.5 percent to $529.6 billion. Inventories slid to $814.4 billion.

Still, the increase in sales failed to cancel out declines of 1.4 percent in January, 2.4 percent in December and 1.5 percent in November. That had been the first three-month drop since July-September 1984.

"Basically, it shows the economy is still operating at below 80 percent throttle," said economist Thomas Runiewicz of the WEFA Group in Bala Cynwyd, Pa. "The whole manufacturing machine has slowed down, which is a reflection of the recession."

Still, the decline in inventory accumulation could ease pressures on businesses to fire more workers. A large increase in inventories in relation to sales could cause growing production cutbacks and job layoffs as businesses attempt to sell off backlogs.

The difference between the stockpile level and the sales pace resulted in an inventory-to-sales ratio of 1.57, meaning it would take 1.57 months to exhaust the backlog at the February sales pace. The January ratio was revised to 1.58 from 1.57 in the initial report last month.

Most analysts do not consider the current inventories-to-sales ratio to be dangerously high. It averaged 1.54 over the last 40 years and rose as high as 1.75 during the severe recession of 1974-75. It averaged 1.49 last year.

"Businesses purposely have kept inventories on the slim side," Runiewicz said. "They have anticipated since the oil shock" following the Aug. 2 Iraqi invasion of Kuwait "that things would slow down and slip into a negative in the fourth quarter and the first quarter."

Retail sales totaled $150.8 billion in February, rebounding from a 1.3 percent drop the previous month. Sales at the wholesale level rose 0.5 percent, to $145.4 billion, after falling 2.2 percent a month earlier.

Manufacturers' sales, however, were off 0.5 percent, to $233.4 billion, after declining 0.9 percent in the preceding month.

Factory inventories were unchanged at $388.4 billion after slipping 0.1 percent in January. Wholesale backlogs inched up 0.3 percent, to $199.5 billion, adding to a 1.8 percent gain the previous month.

by CNB