(RTTNews) - Thursday morning, the Commerce Department released its report on business inventories and sales in the month of December, showing a bigger than expected decrease in inventories along with another steep drop in sales.

The report showed that business inventories fell by 1.3 percent in December following a revised 1.1 percent decrease in November. Economists had expected inventories to fall 0.9 percent compared to the 0.7 percent decrease originally reported for the previous month.

Peter Boockvar, equity strategist at Miller Tabak said the bigger than expected drop in December inventories combined with the downward revision to November inventories and the wider than expected December trade deficit will all lead to a downward revision to fourth quarter GDP.

In late January, the Commerce Department’s advance fourth quarter GDP report showed that GDP fell by 3.8 percent compared to economist estimates of a decrease of 5.5 percent.

“It was an unexpected build in inventories which contributed to the upside surprise to fourth quarter GDP,” Boockvar noted earlier this week.

The bigger than expected decrease in business inventories in December came as retailers’ inventories fell by 1.0 percent and manufacturers’ and merchant wholesalers’ inventories both fell by 1.4 percent.

Additionally, the Commerce Department said that business sales showed a 3.2 percent decrease in December after falling by 5.7 percent in the previous month.

Merchant wholesalers’ sales fell by 3.6 percent, while retailers’ and manufacturers’ sales fell by 3.3 percent and 2.9 percent, respectively.

With sales falling at a faster pace than inventories, the total business inventories/sales ratio edged up to 1.44 in December from 1.41 in November. The increase lifted the business inventories/sales ratio to its highest level since September of 2001.

Boockvar said, “Inventories fell in all major categories but still not fast enough relative to the drop in sales.”

In other economic news, retail sales unexpectedly increased in the month of January, according to a separate report released by the Commerce Department, although the sales growth was likely the result of significant discounts by retailers following the weak holiday shopping season.

The report showed that retail sales rose 1.0 percent in January following a revised 3.0 percent decrease in December. The increase, which came following six consecutive monthly declines, was a surprise to economists, who had expected sales to fall by 0.8 percent.

At the same time, while the Labor Department said jobless claims in the week ended February 7 fell to 623,000 from the previous week’s revised figure of 631,000, economists had been expecting claims to fall to 610,000 from the 626,000 originally reported for the previous week.

The report also showed that the four-week moving average rose to 607,500 from the previous week’s revised average of 583,500, while continuing claims in the week ended January 31 rose to another new record high of 4.810 million.

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Posted in Categories: Economy, Forex, Releases, USA.

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