U.S. wholesale inventories fell modestly in January, while sales rose to their highest level since October 2008, suggesting that inventories would continue to support economic growth in the first quarter.
The rise in sales pushed the inventory-to-sales ratio, a measure of how long it would take to sell stocks at the current sales pace, to a record low of 1.10 months' worth from December's 1.12 months, the Commerce Department said on Wednesday.
The drop in the ratio, which has trended lower for three straight months, indicates that wholesalers might be closer to replenishing their warehouses, which should boost economic growth.
Total wholesale inventories slipped 0.2 percent, smaller than the revised 1 percent drop in December, the department said. December inventories were previously reported as having dropped 0.8 percent.
Economists polled by Reuters had expected stocks of unsold goods at U.S. wholesalers to rise 0.2 percent in January.
A sharp slowdown in the pace at which businesses are liquidating inventories contributed to the U.S. economy recording its fastest growth rate in more than six years in the fourth-quarter.
The rebuilding of inventories is expected to lend support to growth in the first quarter of 2010. The economy resumed growth, with an additional boost from government stimulus, in the second half of last year following the worst downturn since the 1930s.
When businesses increase inventories or slow the rate at which they are liquidating them, they need to meet more demand out of current production, which lifts gross domestic product.
There are worries that the recovery could stall when the boost from inventories and government stimulus fades as consumer spending remains lackluster amid high unemployment.
Officials from the Federal Reserve meet next week and are expected to maintain their pledge to keep interest rates at ultra low levels for an extended period to nurse the recovery.
Sales at wholesalers rose 1.3 percent, the 10th straight increase, to $346.7 billion in January, after rising by a revised 1.2 percent the previous month. December sales were previously reported as 0.8 percent higher. Analysts had expected sales at wholesalers to rise 0.7 percent in January.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)