Wholesale Inventories Drop By Most In 17 Years

CHRISTOPHER S. RUGABER

WASHINGTON (AP) — U.S. wholesalers cut their inventories in February by the steepest amount in more than 17 years, while sales rose for the first time since the summer, encouraging signs that companies may be getting their inventories under control.

The Commerce Department said Wednesday that wholesale inventories dropped 1.5 percent in February, the most on records dating to January 1992 and more than double analysts' expectations.

Sales at the wholesale level rose 0.6 percent, the first increase since June and a sharp reversal from January's revised 2.4 percent drop. That shows retailers and other businesses have begun to replenish their supplies.

The sixth straight monthly drop in wholesale inventories can be viewed as positive in the long-term because once stockpiles have been adjusted for the economic slowdown, businesses may be able to increase orders for new goods. But in the short run, the reductions likely meant companies placed fewer orders and factories produced fewer goods.

Economists expect the drawdown in inventories will contribute to a sharp contraction in economic activity in the first quarter but may set the stage for a rebound later this year. The government estimates the economy shrank by 6.3 percent in the final quarter of last year, and many economists expect a similar drop in the first three months of this year.