U.S. Inventories, Industrial Output Continue To Fall

By BridgeNews U.S. business inventories in June fell 0.4%, the fifth straight monthly decline. The decline in inventories at factories, wholesalers, and retailers was slightly weaker than the consensus estimate for a 0.3% drop. Business sales plunged 1.4%, the biggest decline in nearly nine years, putting the inventory-to-sales ratio at 1.43, up from 1.42 in May. Much of the blame for the slowing U.S. economy has been put on bloated inventories. The decline means businesses are continuing to deplete stocks and have not yet begun to build inventories in anticipation of increase sales. Despite the recent declines, inventories in June were up 0.6% from a year ago, and the inventory-to-sales ratio is up from 1.39 in June 2000. According to the U.S. Commerce Dept., inventories at retailers were down 0.3%. The retail inventory figure provides the final snapshot of U.S. inventory activity for the month. As previously reported, factory inventories fell 0.7%, while wholesale inventories fell 0.2%. In other government reports, U.S. industrial output contracted 0.1% in July, marking the tenth consecutive month of decline, as high-tech production continued to slow, the Federal Reserve announced Aug. 15. But the July decline was the smallest in those 10 months and exceeded expectations of a 0.2% fall. Softening industrial activity lowered the capacity utilization rate to 77.0% in July, from a revised 77.2% in June. However, the capacity utilization figure bested analysts' median expectation for a slip to 76.7%. Over the year ended in July, industrial output was down 3.2%. In response to the drop, firms have begun laying off workers in large numbers. However, the pace of the job loss has slowed: Only 49,000 factory workers lost their jobs in July, after declines of over 100,000 in each of the last three months. And the work week held steady. Output in the manufacturing sector, the largest component of industrial production, was flat in July. But technology firms reduced production by 2.4%. Within the sector, production of communication equipment slipped 3.9%, while semiconductor output fell 2.7%, and computer output sank 0.8%. The capacity utilization rate of high-tech firms was 65.1% compared with 75.6% for the whole factory sector. Excluding high tech, manufacturing output rose 0.1%. Automakers offset the losses in high tech and some other areas. Motor vehicle and parts output shot up 4.7% in July, as producers accelerated assemblies to an annual rate of 12.09 million units during the month, up from 11.72 million in June. Meanwhile, production of consumer goods climbed 0.5% for the month.

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