WASHINGTON D.C.-- Wholesale inventories held by distributors fell in September as companies cut stockpiles in the face of the economic slowdown. The Commerce Department says inventories fell by 0.1%. Analysts had expected them to grow by 0.3%, according to Thomson Reuters. The department also revised the August reading down to a 0.6% increase from 0.8%. Wholesale sales dropped in September, by 1.5%, the department says, following a revised 1.6 decline the previous month.
The steep drop in sales caused the inventories-to-sales ratio to increase to 1.12 from 1.1, meaning distributors have enough goods to last 1.12 months at the current sales levels. The increased ratio also means distributors are having difficulty cutting their stockpiles fast enough to match slowing sales. If inventories get too high, companies will cut back on the production of new goods.
Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25% of all business stockpiles. Factories hold another third, and the Commerce Department says last week factory inventories dropped by 0.7%. The rest is held by retailers.
