- THE MAGAZINE
U.S. business inventories slid 0.2% in April to a seasonally adjusted level of $1.114 trillion, the lowest level since October 1999 . The April fall follows a revised drop of 0.4% in March, originally reported down 0.3%.
Firms' inventory-to-sales ratio edged down to a record low of 1.35 in April from 1.38 in March. The ratio, an indicator of how well firms are matching supply with demand, measures how long it would take in months for a firm to sell all of its current inventory.
The April business inventories drop matched expectations. Firms sharply slowed their reduction of inventories in the first quarter, helping fuel the sizzling 5.6% growth pace that quarter. Business inventories fell by $25.7 billion in the first quarter after falling a record $119.3 billion in the fourth quarter.
Economists look for firms to start rebuilding inventories in the second half of the year as demand picks up. Federal Reserve Chairman Alan Greenspan acknowledged last week that the slowing in the pace of the inventory draw down was the primary factor fueling growth in the first quarter. The key to a sustained recovery is whether final demand kicks in, he said.