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From: tejek	3/14/2008 9:03:26 AM
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Inventories Grow, but Are Still Lean By Tony Crescenzi RealMoney.com Contributor 3/13/2008 10:26 AM EDT Business inventories increased 0.8% in January, three-tenths of a percentage point more than expected and the most since June 2006. In addition, the gain for December was revised upward by a tenth of a percentage point, to a 0.7% gain. The inventory gain was almost certainly unintended, which will cause a further weakening of manufacturing output, impacting the labor market. At some point, the cutback in output will likely exceed what is necessary, sowing seeds for an economic rebound, but that scenario is not yet in sight. Importantly, the inventory-to-sales ratio fell to 1.25 months in January, matching the all-time low. This means that any cutback in industrial output is likely to be shallow. Inventories have never been as extraordinarily well managed entering a downturn as they have been in the current downturn. This will eventually be a major positive, and in and of itself will limit the depth and duration of the downturn.

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