Business Inventories

Decline 1.5% In August

The Commerce Department said company inventories fell 1.5% in August, more than the 0.9% fall that analysts had expected. Inventories also dropped 1.1% in July, slightly larger than the 1% initially estimated. Inventories have fallen for 13 straight months, the longest stretch since they dropped for 15 consecutive months in 2001 to 2002, a period that covered the last recession, the Associated Press reports.

The ratio of sales to inventories declined to 1.33 in August, from 1.36 in July. That means it would take 1.33 months to exhaust inventories at the August sales pace, only slightly higher than August 2008 inventory to sales ratio of 1.30.

Forecasters for the National Association for Business Economics said this week they expected inventories would be trimmed by $97.3 billion this year in inflation-adjusted terms after a reduction of $25.9 billion in 2008. But for 2010, they expect stockpiles to increase by $10.5 billion.

In August, manufacturers cut inventories 0.8%, retailers reduced them 2.3% and wholesalers by 1.3%. Sales in August rose for both retailers and wholesalers, but dipped 0.3% for manufacturers.

Businesses may begin rebuilding depleted store shelves after more than a year of inventory cuts. If that occurs, factory production will begin to rise and help bolster a broad recovery.