Auto retailers rebuild stocks after clunkers sales
WASHINGTON (MarketWatch) - U.S. businesses reduced their inventories for the 13th consecutive month in September, but business sales also declined, stalling the progress companies had made toward normalizing their stockpiles.
Inventories fell 0.4% in September, while sales fell 0.3%, the Commerce Department estimated Monday. The figures are not adjusted for price changes, but are adjusted for seasonal variations.
The stalling out in inventory reduction was confined to the auto retail sector, which rebuilt stocks depleted by the government's cash-for-clunkers program.
Manufacturing companies and wholesalers continued to slash inventories amid higher sales. Retailers excluding auto dealers also cut inventories while sales climbed, the September data showed.
The inventory-sales ratio for all businesses remained at 1.32 in September. The inventory-sales ratio was at 1.25 when the recession began and rose to 1.46 this January before companies began whittling it down.
Once businesses reduce their inventories to desired levels, any increase in sales will have to come from new production, which would boost both U.S. job growth and imports.
The inventory report typically receives little attention from investors, but the pace of inventory reduction will be at the heart of any economic recovery this year. Most economists believe inventories will continue to be cut for several quarters before general restocking is needed.
Inventories fell at a slower pace in the third quarter than in the second. Because what matters is the change from one quarter to the next, inventories added 0.94 percentage points to growth in the third quarter.
Inflation-adjusted business sales are one of four key indicators used to determine if the economy is in recession or expansion. The others are nonfarm payrolls, personal incomes, and industrial production. Only industrial production has rebounded noticeably.
Details
Much of the inventory report had been released previously.
Total business sales fell 0.3% in September and were down 13.1% compared with September 2008.
One new piece of information was retail inventories, which rose 0.6% in September compared with a 2.6% decline in sales. The inventory-to-sales ratio in retail rose to 1.42 in September from 1.38 in July. It was at 1.53 a year ago.
Auto dealers boosted their inventories by 3.8% as sales fell 14.3%. The inventory-to-sales ratio for auto dealers rose to 2.05 from 1.69. It was at 2.52 a year ago. The increase in auto inventories at the retail level in September came ahead of a 7.4% rebound in sales in October.
In a separate report released Monday, the Commerce Department said retail sales rose 1.4% in October.
As reported earlier, sales rose 0.8% in manufacturing while inventories dropped 0.4%. The inventory-to-sales ratio in manufacturing fell to 1.36 from 1.38. It was 1.29 a year ago.
As reported earlier, sales rose 0.6% in wholesale, while inventories dropped 0.9%. The inventory-to-sales ratio fell to 1.18 from 1.20. It was 1.18 a year ago.
