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Inventories Down, Sales Up at U.S. Businesses With AM-Budget Talks, Bjt

May 14, 1990

WASHINGTON (AP) _ Businesses held inventories steady while increasing sales in March, the government said Monday.

Analysts said the report indicated little threat of production cutbacks or loss of jobs.

The Commerce Department reported that shelf and backlot inventories were unchanged at a seasonally adjusted $794 billion. Backlogs had fallen 0.4 percent in February and risen 0.3 percent in January.

Sales rose 0.6 percent to a seasonally adjusted $539.1 billion following gains of 1.4 percent in February and 0.4 percent in January. The February increase was first reported at 1.3 percent.

″What it (the report) means is that producers are looking very realistically at domestic demand and the possibility of a slowing overseas demand for U.S.-made goods and are bringing production in line with those expectations,″ said Gilbert Benz, an economist with the Swiss Bank Corp. in New York.

″Unlike a period of slow growth where businesses often get caught short with an excess buildup of stocks, in the current environment, we see they are anticipating a slowdown and adjusting production so they don’t have to slash inventories and cut production radically,″ he added.

March business activity produced a 1.47 ratio of inventories to sales, matching a January 1989 ratio that was the lowest since the current economic expansion began after the 1981-82 recession. The ratio means that it would take 1.47 months to exhaust inventories at the March pace. It peaked at 1.70 in October 1982.

The decline in inventories was greatest in the manufacturing sector, dropping 0.3 percent for the second straight month. However, backlogs edged up 0.2 percent at the wholesale level after declining 0.3 percent in February. Retail inventories gained 0.3 percent after posting a 0.7 percent loss the previous month.

Sales, on the other hand, dropped 0.2 percent at the retail level and the Commerce Department reported last week that retail sales fell another 0.6 percent in April, the biggest plunge in six months.

But manufacturing sales rose 1.1 percent. Wholesale sales advanced 0.8 percent.

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