Inventories of unsold goods on shelves and
backlots rose by a tiny 0.1 percent in December and matched the
increase in sales, suggesting that companies are working off excess
supplies.
The Commerce Department reported Wednesday that the small
advance pushed total inventories to a seasonally adjusted $1.22
trillion and sales rose to $896.8 billion.
The 0.1 percent rise in inventories was the smallest since the
same-sized increase posted in January 1999.
The inventory-to-sales ratio, which measures how long it would
take businesses to exhaust their inventories at December's sales
pace, remained at 1.36 months. The ratio had risen to 1.36 months
in November, the highest since April 1999.
To trim inventories and bring them more in line with demand,
companies are laying off workers, reducing shifts to curb
production and marking down merchandise.
Federal Reserve Chairman Alan Greenspan in his semiannual report
on the economy, told Congress Tuesday that the sharp slowdown in
economic growth over the last several months was more sudden than
most businesses anticipated, resulting in a "backup in inventories
despite the more advanced just-in-time technologies that have in
recent years enabled firms to adjust production levels more rapidly
to changes in demand."
Inventories rose by 0.3 percent in November, according to
revised figures, not as strongly as the government previously
reported. Sales fell by 0.4 percent, slightly weaker than the
initial estimate.
Worried that the economy was slowing too quickly and could slip
into a recession, the Federal Reserve cut interest rates twice in
January, each by a half percentage point.
In December, inventories at factories were flat at $493.6
billion after a 0.2 percent rise the month before. Sales in
December fell by 0.2 percent to $372.9 billion, on top of a 0.5
percent drop.
At wholesalers, inventories also were steady at $328.9 billion,
following a 0.4 percent gain. Sales grew by 0.7 percent to $252.7
billion, after showing no change in November.
Retailers' inventories rose by 0.3 percent to $398.7 billion,
down from a 0.5 percent rise. Sales increased 0.1 percent to $271.3
billion after falling 0.6 percent in November.
The economy slowed to an annual rate of growth of just 1.4
percent in the last three months of 2000, the weakest pace in more
than five years. The slowdown is being seen in a number of ways.
Manufacturing activity has fallen. Consumer confidence has
plunged. A number of the country's biggest retailers, from Sears to
Office Depot, have announced thousands of layoffs as they shut
unprofitable stores. Automakers also are temporarily shutting down
plants to trim excess inventories.
