Inventories of unsold goods decline

WASHINGTON - Businesses worked off excess stocks of unsold goods in February for the 13th month in a row, potentially setting the stage for ramped-up production in the future.<br> <br> <br> The Commerce Department reported Monday that unsold goods on shelves and back lots fell by a seasonally adjusted 0.1 percent in February. The drop came even as businesses&#39; sales declined by 0.9 percent.<br> <br> One of the biggest sources of the national economy&#39;s weakness has been aggressive inventory liquidation by businesses. To cope with lackluster sales, manufacturers sharply cut production and companies ended up heavily discounting merchandise, which began piling up as the economy slowed.<br> <br> Even though inventory reduction is a drag on economic growth, economists say it is crucial for companies to get rid of extra stocks. To replenish inventories, manufacturers will need to boost production, something that already is occurring as the economy recovers from a recession that started in March 2001.<br> <br> In January, businesses cut inventories by 0.1 percent, helped out by a 0.9 percent increase in sales.<br> <br> Many economists estimate the cycle of inventory liquidation is near an end.<br> <br> Against that backdrop, some economists say first-quarter economic growth - as measured by the gross domestic product - may have hit a sizzling rate of around 5 percent. Economists predict economic growth will get a sizable boost not only if businesses build up inventories but also if they hold them steady.<br> <br> In February, manufacturers cut inventories by 0.4 percent, even as sales dropped by 2.8 percent. That came after factories pared inventories by 0.8 percent, helped out by a 1.4 percent rise in sales in January.<br> <br> At wholesalers, inventories declined by 0.7 percent in February, aided by a 0.8 percent sales gain. In January, wholesalers whittled inventories 0.5 percent, while sales rose 1.2 percent.<br> <br> Retailers saw inventories rise 0.7 percent in February, while sales advanced 0.2 percent. That came after inventories rose 1 percent and sales inched up 0.1 percent in January.<br> <br> Monday&#39;s report also showed that the decrease in February&#39;s sales lifted the inventory-to-sales ratio - which measures how long it would take businesses to exhaust their inventories - to 1.38 months.<br> <br> To rescue the economy from recession, the Federal Reserve slashed interest rates 11 times last year. Citing signs of an economic turnaround, the Fed opted to leave interest rates steady in January and March. Given the fragile state of the economic recovery, economists project that the Fed won&#39;t begin boosting interest rates until after May at the earliest.<br> <br>

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