Business Inventories Fall in September

WASHINGTON – U.S. businesses trimmed their inventories for the eighth straight month in September, as firms continued to pare down overflowing stocks that stacked up as the economy slowed, the government said on Thursday.

Inventories at U.S. businesses fell 0.5 percent in September following a downwardly revised 0.2 percent decline in August.

The decline exceeded estimates from Wall Street analysts, who on average had figured business inventories fell 0.3 percent in September.

Business sales, meanwhile, fell 2.8 percent in September as the attacks on Sept. 11 sapped consumer and business spending. The decline in September followed a 0.1 percent gain in August.

Although inventories fell, the decline in sales led to a sharp rise in the stock-to-sales ratio, which measures how long it would take firms to sell down existing inventories. The ratio rose to 1.45 months' worth in September from 1.42 months' worth in the prior month.

The stock-to-sales ratio was the biggest since a matching 1.45 months' worth in Sept. 1998, Commerce Department officials said.

The decline in inventories in September was led by a big drop in manufacturers' stocks. Manufacturing inventories fell 0.9 percent in September following a 0.7 percent drop in the prior month. Stocks on retailers' shelves, meanwhile, fell 0.3 percent in September after gaining 0.4 percent in August.

U.S. businesses found themselves with overflowing stock shelves as the economy -- and demand -- began to slow a year ago. Progress in reducing inventories is considered a good sign for the struggling economy. When firms cut back their stocks far enough, they begin to order new goods, thus boosting production at U.S. factories, economists say.