Business inventories jumped 0.7 percent in September, the 21st consecutive monthly increase, while sales remained virtually unchanged, the government reports.
The Commerce Department said inventories held on shelves and backlots rose $5.5 billion to a seasonally adjusted $749.4 billion, while sales fell a scant $35 million to $495.4 billion.The combination of rising inventories and flat sales is a sign of economic weakness. If the trend continued, it could lead to fewer orders from retailers, so they could sell off their backlog of goods, and consequently to production cutbacks and layoffs at manufacturing plants.
However, business sales have been generally strong this year and economists said the gain in inventories during most months was in line with sales.
The September inventory increase followed a large 1.1 percent gain in August and a 0.7 percent rise in July. The last decline was in December 1986.
The small September decline in sales snapped a string of nine consecutive increases. They had shot up 1.3 percent in August and rose a slight 0.1 percent in July.
Inventory accumulation in September was led by a substantial 1.5 percent rise at retailers, where sales were the weakest. Wholesale inventories rose only 0.1 percent, while inventories at factories increased 0.6 percent.
In sales, a 0.1 percent dip at manufacturing plants and a 0.3 percent decline at retail stores offset at 0.5 percent increase at the wholesale level. Sales have been particularly strong at the manufacturing level this year because of an export boom fueled by the lower value of the dollar.
An advance estimate of retail sales for October, released Tuesday, showed a strong 0.9 percent gain, evidence that the accumulation of inventories may have moderated somewhat as the fourth quarter began.
The combination of an increase in inventories and steady sales left the inventory-to-sales ratio at 1.51 in September, up from 1.50 during the three previous months.