Wholesale Sales Rise 1.2% in January

Sales at U.S. wholesalers showed the largest gain in 19 months in January and inventories dropped to a two-year low, signs of a rebounding economy that will stimulate factory production.

The 1.2% rise in sales was the first since August and the largest since June 2000, the Commerce Department reported. Stockpiles fell 0.2% in January, the eighth consecutive decline, and their value declined to $287.7 billion, the lowest since January 2000.

“Sales are so strong that inventories are getting even thinner,� said Joseph LaVorgna, a senior economist at Deutsche Bank Securities in New York. “You are going to get more production, employment and income growth because inventories are going to be rebuilt.�

The inventory-to-sales ratio, a measure of how long goods remain on storeroom shelves, fell to 1.28 months, the lowest since March 2000. U.S. retail chains, including Best Buy Co. and Wal-Mart Stores Inc., reported last month the biggest monthly gain in sales in almost two years, opening the way for orders to increase at distributors and manufacturers.

Factories, wholesalers and retailers pared inventories by a record $120 billion at an annual rate from October to December, according to previous data from the Commerce Department. Consumer spending grew during the quarter at a 6% annual rate, the fastest in 31/2 years.

Wholesalers account for about one-fourth of all business stockpiles. Retailers and factories account for the rest. Last week, the Commerce Department reported a 0.6% decline in January factory inventories, the smallest decrease in eight months, after a 0.9% drop a month earlier.

Record sales of existing homes in January may be affecting other spending. Wholesale sales of durable goods rose 1.3% in January, led by building materials and furniture, after falling 0.7% in December. Durable goods inventories fell 0.4% in January, led by autos and parts, metals and furniture, after declining 1.1%.