Business Inventories Fall 0.1%

U.S. businesses whittled down their inventories in August as sales edged up slightly, the Commerce Department said on Monday. 

The 0.1 percent decline in August inventories followed a 0.5 percent decrease in July and was a fairly healthy sign for the economy which had suffered earlier this year from a buildup of unsold goods. However, since the report covers a time period before the Sept. 11 attacks on the United States, it provided only limited information about economic trends going forward. 

The August drop in inventories was more mild than the 0.3 percent decline expected by U.S. economists in a Reuters survey. 

Business sales inched up 0.1 percent in August after a 0.4 percent rise in July. 

Factories, which have throttled back production sharply, saw a big drop of 0.7 percent in inventories in August. 

However, retailers' inventories grew 0.6 percent. Stocks of cars and car parts similarly increased 0.6 percent. 

The stock to sales ratio, which measures how long it would take firms to sell down existing inventories, stayed steady at 1.42 months' worth in August when compared to July. The ratio was up slightly from 1.41 months' worth a year ago. 

A glut of unsold goods on businesses shelves has hampered production for much of this year, so progress in paring down the stocks could give way to a pickup in output later on. But the Sept. 11 attacks on New York and Washington have severely complicated the economic outlook. 

The attacks exacerbated existing weakness in the economy as nervous consumers shunned shopping malls and car dealerships. The sudden drop in demand could throw inventories out of kilter again.