Businesses Decrease Inventories in August

Uneasy about the economic recovery, businesses trimmed their stockpiles of unsold goods in August for the first time in four months.

Inventories on shelves and back lots edged down by 0.1% in August, a turnaround from July when businesses boosted their stockpiles by a solid 0.4%, the Commerce Department reported Tuesday.

The decline represented the first time since April that businesses, including retailers, pared inventories, suggesting that companies wanted to keep stocks lean given economic uncertainties, including possible war with Iraq.

“I think it is a sign that businesses feel economic weakness is going to persist for a while,” said economist Clifford Waldman, president of Waldman Associates.

Businesses’ sales, meanwhile, grew by 0.2% in August, a slowdown from the brisk 1.3% increase posted in July.

Tuesday’s report also showed that the inventory-to-sales ratio fell to 1.34 months, a record low. That means it would take businesses 1.34 months to exhaust inventories at the current sales pace.

“Companies have not bought into the recovery, so they want to keep inventories extremely tight so as not to get left holding the bag,” said economist Ken Mayland, president of ClearView Economics.

Retailers reduced their inventories by 0.3% and sales grew by 0.6%.

At factories, inventories were flat in August as sales slid 0.6%. But wholesalers increased stocks 0.2% as sales rose 0.9%.