WASHINGTON – Inventories at U.S. businesses fell unexpectedly by 0.5 percent in July and the heaviest sales pace since December pushed the stocks-to-sales ratios to a record low, a Commerce Department (search) report showed on Thursday.
Business inventories shrank after an unchanged reading in June, the report showed. Analysts polled by Reuters were expecting inventories to rise 0.1 percent in July.
Meanwhile, sales jumped 1.1 percent in July after an upwardly revised 0.8 percent gain the preceding month.
The strong sales to performance pushed the inventories-to-sales ratio (search) — a measure of the number of months it would take to deplete stocks at the current sales pace — to a record low of 1.26.
The failure of businesses to increase already lean inventories could support the view of some economists that producers will need to boost output over the remainder of the year to meet consumer and business demand.
Inventories at retailers fell 1.8 percent, the biggest decline since October 2001, largely on a 5.4 percent drop in automobile and parts inventories. Auto sales soared in July as a result of special discounts offered by car makers.
When car and car parts stocks were stripped out, retail inventories were unchanged from the preceding month.
Manufacturers' inventories (search) rose 0.5 percent in July, while wholesale inventories fell 0.1 percent.