Wholesale Inventories Fall By More Than Expected In August

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While the Commerce Department released a report Thursday morning showing a bigger than expected decrease in wholesale inventories in the month of August, the report also showed a continued increase in wholesale sales.

The report showed that wholesale inventories fell by 1.3 percent in August following a revised 1.6 percent decrease in July. Economists had been expecting inventories to decrease by 1.0 percent compared to the 1.4 percent drop originally reported for the previous month.

With the continued decrease, wholesale inventories in the month of August were down 14.7 percent compared to the same a month a year ago.

The bigger than expected decrease in inventories reflected a 1.6 percent drop in inventories of durable goods as well as a 0.9 percent decrease in inventories of non-durable goods.

Inventories of metals and minerals showed a notable decline along with inventories of motor vehicles and parts.

As mentioned above, however, the report also showed that wholesale sales increased by 1.0 percent in August after rising by 0.6 percent in July. Nonetheless, sales were down 17.7 percent compared to August of 2008.

The monthly increase in wholesale sales reflected a 1.2 percent increase in sales of durable goods, which benefited from a 7.7 percent increase in sales of motor vehicles and parts. Sales of non-durable goods also rose by 0.9 percent amid a 7.0 percent increase in sales of petroleum products.

With inventories falling and sales rising, the wholesale inventories/sales ratio fell to 1.20 in August from 1.23 in July. The ratio came in at 1.16 in August of 2008.

Commenting on the data, Peter Boockvar, a Miller Tabak strategist, said, "While today's figure is just 25 percent of overall Business Inventories, it shows that at least for 2/3 of Q3, inventories remained a drag on GDP and the hoped for Q3 contribution is not fully there."

"However, the backdrop of lean inventories still remains favorable for an inevitable uptick," Boockvar added.

While the Commerce Department released a report Thursday morning showing a bigger than expected decrease in wholesale inventories in the month of August, the report also showed a continued increase in wholesale sales. The report showed that wholesale inventories fell by 1.3 percent in August following a revised 1.6 percent decrease in July. Economists had been expecting inventories to decrease by 1.0 percent compared to the 1.4 percent drop originally reported for the previous month. (Market News Provided by RTTNews)