Wholesalers starting to align sales and inventories

Here's a spot of good news from America's wholesalers: The balance of sales and inventories is finally headed in the right direction.

After a dramatic eight-month surge of rising inventories and declining sales, the wholesale inventories/sales ratio declined from January's peak of 1.34 to 1.31 in February, the Commerce Department reported Wednesday. That means that wholesalers are boosting sales even as they clean out inventory.

Autos lead the way

Much of February's adjustment came in the automotive sector. Sales of motor vehicle and motor-vehicle parts and supplies were up 3.7 percent over January's figure on a seasonally adjusted basis, while inventories were down 7.9 percent.

The result was a big fall in the auto sector's inventories/sales ratio: from January's 2.37 to February's 2.10.

Difficult adjustment remains

That ratio is still out of whack. Auto wholesalers have twice as much inventory as they have sales. February’s drop only brings the ratio down to around the November 2008 level.

But like many other economic signs right now, these figures are less bad than before.

And in this economy, less bad is good.