Business Inventories Off

Washington, DC, November 14, 2006–Business inventories rose 0.4% in September as sales dropped 2.0%, the Commerce Department reported Tuesday.

The inventory-to-sales ratio was 1.30. The typical business had about 40 days of sales on hand.

Inventories fell 0.7% in September in the retail auto sector, while sales climbed 0.7%.

The report missed the expectations of Wall Street economists, who were predicting inventories would rise by 0.6%.

The monthly inventory report rarely moves financial markets, mostly because many of the numbers have been previously reported. Economists, however, use the data to project quarterly growth.

A new piece of data in the report was the 0.1% decline in September retail inventories.

Retail inventories excluding motor vehicles rose 0.1% in September. The September retail inventory-to-sales ratio rose to 1.50 from 1.49 in August.

Business sales increased a downwardly revised 0.5% in August, while inventories rose an unrevised 0.6%.

In the past year, business inventories are up 7.6%, while sales are up 4.9%. The data is not adjusted for price changes.

Inventories remain tight, which could fuel inflation by creating bottlenecks for scarce goods.