Business inventories jumped 0.8 percent in December, the government reported yesterday, as the backlog of unsold products continued to swell.
The inventory advance came while business sales were rising 1.3 percent to a seasonally adjusted $466.57 billion in December after two months of sluggish activity. Business sales fell a revised 0.4 percent in November, more than initially reported, and were essentially flat in October.
The combination of rising inventories and rising sales pushed the inventory-to-sales ratio down slightly to 1.50 in December from 1.51 in November. The decline meant that it would take 1 1/2 months to exhaust current inventories at the December sales pace.
The Commerce Department said inventories held on shelves and backlots rose by $5.45 billion to a seasonally adjusted $701.87 billion in December following even larger increases of 0.9 percent in November and 1.1 percent in October.
"We have got an involuntary inventory buildup," said William Rees-Mogg, an economist with Strategic Investment, an investors' newsletter. "Products have been ordered, but they are not getting sold. That is always characteristic of the last stages of an economic recovery before you get a downturn."