Wholesale Inventories Drop By Most In 17 Years

"The record decline in wholesale inventories is a sign of much-needed progress, and will eventually help support a recovery," Kim Whelan, economic analyst at Wachovia Corp., wrote in a note to clients.

The department said the inventories-to-sales ratio dropped for the first time since the middle of last year, to 1.31 from 1.34 in January. The ratio measures how many months it would take to clear inventories at the current sales pace. Still, it remains far above the 1.14 figure in February 2008.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

A record decline in stockpiles of durable goods, which fell 2.4 percent in February, and a record 7.9 percent drop in auto and auto supplies led the overall slide in wholesale inventories.

Auto dealers are scrambling to reduce bloated inventories as sales fell sharply late last year and early this year. U.S. auto sales for companies such as General Motors Corp., Chrysler LLC and Ford Motor Corp. fell to record lows in February, before rebounding a bit last month.