Nov. inventories decline, sales rise

WASHINGTON -- Businesses at the wholesale level trimmed their stockpiles in November for the first time in nearly a year, but the decline likely reflected their inability to keep up with strong gains in sales.

The Commerce Department says wholesale inventories dipped 0.2 percent in November, the first decline since December 2009. Sales rose 1.9 percent after a 2.6 percent surge in October -- the largest monthly gain since March.

Private economists said the small drop in inventories was not worrisome because it probably reflected an inability of companies to keep up with unexpectedly strong sales demand.

"Businesses sold more than they had expected during the holidays and that left them with lower inventories. In the context of the strong sales gains, the small decline in inventories is a good thing," said David Wyss, chief economist at Standard & Poor's in New York. He predicted that inventories will rebound in the early part of 2011 as businesses step up restocking efforts.

Companies had increased their inventories for 10 straight months before they dipped in November to a level of $425.5 billion. Even with the decline, wholesale stockpiles are 10.1 percent above the lowest point since the recession began -- $386.3 billion in September 2009.

Businesses had $455.6 billion worth of inventories in August 2008 when sales began to plunge. They responded by cutting back to control costs.

Strong gains in both inventories and sales have been good news for many industries, which have been able to boost production and hire more workers over the past year.

Economists believe that businesses will keep boosting their stockpiles as long as sales continue to rise. Retailers enjoyed the best holiday shopping season in four years and auto sales have been rising in recent months.

Economists are hoping that the tax-cut package approved by Congress in December will provide further support to consumer spending in the coming year. It includes a cut in Social Security payroll taxes, leaving a household earning $50,000 a year with another $1,000 to spend.

For November, the drop in wholesale inventories reflected declines in stockpiles of electrical equipment, drugs, food and furniture. Stockpiles of autos, metals, hardware and machinery all rose.