Business inventories in August fell at a higher than expected pace of 1.5% while the July release saw a revision down to a drop of 1.1%. The figure has shown declines in each of the past twelve months as the recessionary environment caused firms to scale back purchasing while working through slack. Largely helping to cause the sharp decline were auto inventories, which fell 7.9% as the government’s “cash-for-clunkers” program helped sales through much of August. Ultimately, the inventory/sales ratio is now at an eleven month low, raising optimism that businesses may start to increase stockpiles before the year-end. Companies have cut costs and minimized capital expenditures drastically in the third quarter, helping some including Alcoa and Intel to post favorable results. Likewise, sales ahead are expected to improve as the economy grows.
Reaction to the release proved minimal in currency markets, while equities and energy commodities are continuing to hold onto gains on optimism built from Intel and JPMorgan earnings as well as news in the overnight session and China.
[B]Business Inventories Monthly Chart[/B]
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