Sales Climb Healthy 0.7%; Inventories Also Creep Up

Inventories held by American businesses, led by a big jump in unsold cars, rose 0.4% in July while overall business sales were climbing a healthy 0.7%, the government reported today.

The Commerce Department said that inventories on shelves and in back lots rose to a seasonally adjusted $591.35 billion in July following a 0.4% June increase.

Much of the inventory advance came at car dealerships, where the stock of unsold cars climbed by 4.1% after rising 17.7% in June.

The huge stock of cars forced many auto dealers in August to reinstitute attractive cut-rate financing offers in an effort to clear out showrooms before the start of the new model year.

Overall, inventories at the retail level climbed by 1.1% while inventories held by wholesalers rose 0.5% and inventories at the manufacturing level were essentially unchanged from June.

Business sales hit a seasonally adjusted $428.55 billion in July after rising 0.9% in June. The gain was led by a 1.7% increase in sales at the wholesale level. Manufacturers saw sales rise 0.4% while retailers had a modest 0.3% sales increase.

An advance report on Friday said that retail sales in August climbed 0.8%, the best gain since April, as auto sales jumped 3.2% in response to the sales incentives.

The combination of rising sales and rising inventories balanced each other out and left the inventories-to-sales ratio unchanged at 1.38 in July. That means it would take 1.38 months to exhaust inventories at the July sales pace.