Business Inventories Continued to Drop in February

Daily Forex Fundamentals | Written by Wachovia Corporation | Apr 14 09 14:43 GMT |

Businesses continued to aggressively pare back inventories in February as the longest and deepest recession since World War II dragged on. Declines in inventories at retailers (the new information in this report) continued for a fifth straight month, dropping 1.2 percent. We expect inventories to be a major drag on first quarter GDP. Inventories Fell Again Inventories dropped another 1.3 percent in February after a similar sized decline in January. Over the last three months alone, businesses have cut an astonishing $239.1 billion at an annual rate. Retailers pulled back further, as liquidations at bankrupt firms as well as cut backs at ongoing firms continued. We do not expect this trend to let up until at least mid-year. Cuts Across the Board Inventory declines now stretch across all the major sectors. The inventory-to-sales ratio showed its first decline in 8 months as total sales inched slightly higher. Businesses were clearly caught with far too much inventory late last year and have had to cut aggressively to start 2009. We expect the drag from inventories may top three percentage points when GDP figures for the first quarter are released at the end of the month. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.