Business Inventories Fall 7th Time in 8 Months

Businesses continued to sell off inventories of finished goods during August, the Commerce Department said Tuesday, although there were signs that the rate of stock reductions might be slowing.

Inventories fell 0.1% to a seasonally adjusted $806.18 billion after being unchanged in July. Previously, the department said July inventories had fallen 0.3%.

“I think we’ve just about reached the low turning point for inventories now, and we’re going to start to see higher inventories during the fourth quarter,” said Kris Bledowski, an economist with Cahners Economics in Newton, Mass.

“I still think we have a recovery and that it has not stalled and there should be consistently stronger numbers as the year wears on,” Bledowski said. “This (drawdown of stocks) has produced a very lean production environment.”

Stocks of unsold goods had dropped for six straight months from January through June as business cut production during the recession and then proved reluctant to raise it pending clearer evidence of an economic revival.

Economists say that given the long string of inventory cuts, companies eventually must rebuild stocks. That would boost job opportunities and put more money in consumers’ hands.

Consumers so far have been reluctant participants in the recovery that the Bush Administration said began during the second quarter. Job fears and high levels of debt are restraining consumer spending, which fuels two-thirds of economic activity.

Sales by manufacturers, retailers and wholesalers were flat in August at a seasonally adjusted $540.93 billion.