Wholesale inventories fall, sales grow in Sept.

WASHINGTON - Businesses cut inventories at the wholesale level for a record 13th consecutive month in September, but sales rose for a sixth straight time.

The hope is steadily rising sales will encourage businesses to begin restocking shelves, a move that would boost production and bolster an economic recovery. But worries persist that consumer spending, which accounts for 70 percent of economic activity, could falter as various government stimulus programs begin to wane and unemployment keeps surging.

The Commerce Department said Friday that businesses reduced inventories at the wholesale level 0.9 percent in September, slightly less than expected. Sales by wholesalers rose 0.7 percent, slightly better than the 0.6 percent gain economists expected.

Steady gains in sales should help convince businesses to stop slashing inventories, which has been a severe drag on growth, economists say. A switch to rebuilding stockpiles would trigger higher factory production and economic growth.

However, consumers face rising unemployment and other headwinds as the economy struggles to emerge from the worst recession since the 1930s. The Labor Department said Friday in a separate report that unemployment surpassed 10 percent for the first time since 1983, jumping to 10.2 percent in October. Economists expect it will go even higher in coming months.

The continuing surge in unemployment could jolt already shaky consumer confidence and cause a cutback in sales. However, the nation's retailers reported this week that their October sales were the best since April 2008, according to a report by the International Council of Shopping Centers-Goldman Sachs. Sales at stores open at least a year rose 2.1 percent, compared with a 4.2 percent drop in October 2008. The October results beat estimates for a 1 percent gain and followed a surprising 0.6 percent increase in September.

Sales at stores open at least a year are considered a key indicator of a retailer's health. Bright spots included Costco Wholesale Corp.; TJX Cos., which operates T.J. Maxx and Marshalls; and Gap Inc. Sales at most teen merchants were weak.

Auto sales have been on a roller coaster in recent months, surging in August as consumers rushed to take advantage of the Cash for Clunkers program before it expired. Sales dropped sharply in September, but reports this week showed that auto sales posted solid gains in October.

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.

The decline in inventories is the longest stretch on government records that date to 1992. The previous record was nine straight declines during a period that covered the nation's last recession in 2001.

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