October 14, 2015 / 2:12 PM / in 2 years

U.S. business inventories unchanged, sales fall

WASHINGTON (Reuters) - U.S. business inventories were flat in August for a second straight month as businesses work through a stockpile of merchandise accumulated in the first

half of the year.

The Commerce Department said on Wednesday the unchanged reading in August’s inventories followed a downward revision to July’s data. Inventories in July were previously reported to

have increased 0.1 percent.

Inventories are a key component of gross domestic product.

The economy is currently going through a period of so-called inventory correction after inventories increased by more than $100 billion in each of the last two quarters, a record back-to-back rise that was seen as unsustainable.

Inventories made no contribution to the second quarter’s annualized GDP growth pace of 3.9 percent. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.4 percent in August after increasing 0.3 percent in July.

August trade data published last week suggested GDP growth slowed significantly in the third quarter, with estimates currently running below a 2 percent rate. Economists expect inventories will be a drag on third-quarter growth.

The slow pace of inventory accumulation is weighing on manufacturing, which has already been undermined by a strong dollar, weak global demand and lower crude oil prices.

In August, business sales fell 0.6 percent after increasing 0.1 percent in July. At August’s sales pace, it would take 1.37 months for businesses to clear shelves. That ratio was up from 1.36 months in July.

Reporting by Lucia Mutikani; Editing by Paul Simao

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