Business inventories grew 0.5 percent in September, the government said yesterday, causing some analysts to express concern that the buildup could lead to further production cuts and job losses.
"It's consistent with the idea that the economy is sliding into a recession and growth will be negative in the fourth quarter," said economist Evelina Tainer of First National Bank of Chicago. She noted that industrial production in October already dropped 0.8 percent, its sharpest decline in nine months.
Other analysts said the inventory level itself had not reached a dangerous level, although continued vigilance was needed to prevent an even deeper reduction in output.
The Commerce Department said inventories held on shelves and backlots in September totaled a seasonally adjusted $811.5 billion, up from $807.5 billion the previous month.
But the accumulation had slowed from a 0.7 percent gain in both July and August, the largest increases since an 0.8 percent advance in July 1989.
Business sales dipped 0.5 percent to a seasonally adjusted $548.7 billion, down from $551.5 billion a month earlier.
It was the first decline in sales since a 0.4 percent drop in July and the largest since a 1.0 percent decrease last April. August sales had jumped 2.1 percent.
The ratio of inventories to sales edged up to 1.48 from 1.46 in August. The ratio means it would take 1.48 months to exhaust the backlog of goods at the September sales pace.
Still, the ratio was down from its recent peak of 1.54 in July 1989, and economist Michael P. Niemira of Mitsubishi Bank in New York said businesses are now able to react more rapidly to economic developments and avoid serious buildups.
The ratio reached a high of 1.74 in January 1982 in the last recession.
"I think you'll see inventories coming down, but coming down coincident with a slowdown in sales," Niemira said. He noted that retail purchases last month slowed to a 0.1 percent increase from a 1.3 percent advance in September. In both months, however, the sales gains were fueled by high gasoline prices rather than volume. When gasoline was excluded, retail sales fell 0.1 percent last month while rising just 0.9 percent in September.
All categories reported inventory increases -- manufacturers' inventories were up 0.6 percent, and wholesalers' and retailers' inventories rose 0.4 percent each.
At the same time, manufacturers' sales fell 0.7 percent, while wholesalers posted a 1.8 percent decline. Sales at the retail level jumped 1.3 percent.