WASHINGTON — Businesses slashed inventories at the wholesale level for a fifth straight month in January, the longest stretch since the last recession in 2001 and a warning signal that companies are likely to keep cutting production as they cope with the deepening downturn.
The Commerce Department said Tuesday that wholesale inventories fell 0.7 percent in January, which was slightly smaller than the 1 percent fall economists had expected. It followed a 1.5 percent drop in December initially reported as a 1.4 percent decline.
Sales at the wholesale level dropped 2.9 percent in January, the seventh consecutive decline.
Businesses have been struggling to slash stockpiles of goods on shelves and back lots in the face of plunging sales. That can have severe consequences for the economy because less stockpiling usually leads to cutbacks in production and layoffs.
The current recession — which began in December 2007 — so far has eliminated 4.4 million jobs. The government last week said the unemployment rate rose to 8.1 percent in February, the highest level in more than 25 years, with a net total of another 651,000 jobs lost.
The plunge in wholesale sales and smaller drop in inventories in January left the ratio of inventories to sales at 1.3, up from 1.27 in December and the highest since January 2002. That ratio means it would take 1.3 months to exhaust stockpiles at the wholesale level at the current sales pace.
Wholesale inventories are goods held by distributors that 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.
