April 8 (Bloomberg) -- Sales at U.S. wholesalers rose in February for the first time in eight months, contributing to a record drop in inventories that indicates distributors are well on the way to eliminating the glut in stockpiles.

Sales rose 0.6 percent, the first increase since June, the Commerce Department said today in Washington. The 1.5 percent decrease in the value of stockpiles was the biggest since records started in 1992.

At the current sales pace, it would take 1.31 months for distributors to deplete the amount of goods on hand, the lowest since November, compared with 1.34 months in January. Smaller inventories mean any stabilization in demand will translate into a pick up in orders and production.

“Excess supply conditions don’t look as bad as they were,” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. “This is encouraging because it’s not just happening in wholesaling, it’s happening in the factory sector, too.”

Inventories at wholesalers were forecast to drop 0.7 percent after an initially reported 0.9 percent decrease in January, according to the median estimate of 34 economists surveyed by Bloomberg News. Projections ranged from a decline of 0.7 percent to a 0.5 percent gain.

Business Stockpiles

Wholesalers make up about 25 percent of all business stockpiles. Factory inventories, which account for about a third of the total, dropped 1.2 percent in February, Commerce reported on April 2. Retail stockpiles, which make up the rest, will be included in the April 14 business inventories report.

Today’s report showed stockpiles of durable goods, or those meant to last at least three years, fell 2.4 percent in February, the biggest decline on record. Durable sales climbed 2 percent, the most since April 2008.

Auto inventories fell a record 7.9 percent as sales rose 3.7 percent, today’s report showed.

Today’s report showed stockpiles of non-durable goods such as fuels and grains fell 0.2 percent. Sales of non-durables decreased 0.4 percent, with a 3.7 percent decline in petroleum sales.

The decline in stockpiles is a major reason analysts project the economy shrank again last quarter, even as it raises optimism about a pickup in growth later this year. Gross domestic product in the first quarter probably dropped at a 5.2 percent annual pace after falling at a 6.3 percent rate in the last three months of 2008, according to the median estimate of economists surveyed in early March.

Today’s report was “encouraging,” Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said in a note to clients. “By mid-year, we should be seeing a sizable pace of contraction in inventories relative to sales, which should pave the way for positive production figures by the second half of the year.”

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: April 8, 2009 11:05 EDT