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NewsMine economy united-states 2004 2004-jan-mar Viewing Item | Inventory levels low show wary business { March 12 2004 } Original Source Link: (May no longer be active) http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381742119http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381742119
Inventory levels show businesses still wary By Christopher Swann in Washington Published: March 12 2004 21:39 | Last Updated: March 12 2004 21:39 US businesses remain more cautious in adding to their inventories than economists had thought, according to figures released on Friday which may dent confidence in the strength of the country's economic recovery.
Inventory levels rose by just 0.1 per cent in January - a third of the improvement expected by analysts. In December inventories had climbed by a more healthy 0.3 per cent.
Relative to sales, inventories remain at record lows, suggesting that companies are reluctant to stock up on goods in anticipation of future demand. Stocks were enough to cover 1.3 months worth of sales - compared with about 1.4 months of sales through most of 2002.
The low level of business inventories is thought to reflect a lack of confidence in the sustainability of demand. But it also partly underlines a long-term trend in business towards cutting back on costly inventories and trying to ensure that stocks arrive just in time to meet demand. In 1995 companies carried enough stock to cover almost a month and a half of sales.
"The message from these figures is that companies are still reluctant to commit to any unnecessary expenses," said Nigel Gault, director of US research at Global Insight, the economic consultancy. "It also suggests that companies may still have their reservations about how sustainable the pick-up in demand will be or that if demand does pick up further they will be able to crank up production fairly swiftly."
This caution has also been reflected in the employment figures. In February companies did not add to their payrolls and employment would have fallen if government employment had not risen.
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