Business Inventories Down in July
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Inventories (search) at U.S. businesses dipped in July amid strong sales, the government said on Monday in a report that suggested companies might need to boost output to keep up with demand.
Inventories at the nation's manufacturers, retailers and wholesalers slipped 0.1 percent in July to a seasonally adjusted $1.18 trillion, the Commerce Department (search) said. The report was close to expectations on Wall Street for a drop of 0.2 percent.
The decline brought the closely watched inventories-to-sales ratio (search) — a measure of how many months it would take to deplete stockpiles at the current sales pace — down to a record low 1.37 from 1.39 in June.
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Businesses have kept inventories at historically lean levels over the past year as they awaited a decisive pickup in demand. In the second quarter, businesses cut stockpiles by $20.9 billion, a reduction that weighed on economic growth.
Amid mounting signs the economy is accelerating, analysts expect businesses to soon begin restocking shelves and warehouses, which would give a boost to production and further bolster growth.
Total business sales rose 1.6 percent in July, while retail sales rose 1.4 percent.
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While overall inventories slipped, retail inventories grew 0.3 percent both overall and excluding motor vehicles. Auto inventories rose 0.3 percent in July after a hefty 0.6 percent gain a month earlier.
As previously reported, manufacturing inventories fell 0.5 percent and wholesale inventories were unchanged in July.