Businesses cut inventories, revealing caution

Businesses reduced inventories in December, a sign that they remain cautious about the strength and durability of the economic recovery.

The Commerce Department said Friday that businesses trimmed stockpiles by 0.2 percent in December, a weaker performance than the 0.2 percent gain that economists had expected. Total business sales rose 0.9 percent in December following a 2.4 percent increase in November.

The hope is that further gains in sales will convince businesses to make sustained increases in their inventories, a development that would boost factory production and help support a recovery from the deepest recession since the 1930s.

Businesses increased inventories by 0.5 percent in November and 0.3 percent in October, two monthly gains that followed 13 consecutive declines in inventories as companies struggled to control costs during the recession by trimming their stockpiles.

It was this slowdown in the pace of inventory reductions that contributed nearly two-thirds of the growth in the overall economy in the fourth quarter as measured by the gross domestic product.

The GDP shot up at an annual rate of 5.7 percent in the October-December period, the strongest showing in six years. The concern is that the boost from inventories will be temporary and GDP will slow significantly in coming quarters if consumer demand falters in the face of still-high unemployment.

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

For December, the 0.2 percent decline in total inventories reflected a 0.1 percent drop in inventories held by manufacturers and a 0.8 percent decline in inventories held by wholesalers. Retail inventories were unchanged during the month.

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

Wholesalers hold 25 percent of all inventories with factories holding about one-third and retailers holding the rest.

The 0.9 percent sales gain in December reflected a 1.9 percent jump in sales by manufacturers and a 0.8 percent rise in sales by wholesalers with sales at the retail level falling by 0.1 percent. A separate report Friday showed that retail sales rose by 0.5 percent in January, a better-than-expected showing.

The reduction in inventories and the rise in sales in December left the ratio of inventories to sales at 1.26 in December, meaning that it would take 1.26 months to deplete existing inventories at the December sales pace. That compared to a 1.27 inventory-to-sales ratio in November.