Wholesale inventories fall for record 10th straight month but sales post second straight gain

Businesses cut inventories at the wholesale level for a record 10th consecutive month in June, a decline that has contributed to the longest recession since World War II. The Commerce Dept. said wholesale inventories declined 1.7% in June, nearly double the 0.9% drop economists expected. But in an encouraging sign, sales rose 0.4% for a 2nd straight mo, the first back-to-back increase in a year. The hope is a rebound in sales will encourage businesses to switch from reducing their stockpiles to building up inventories to meet rising demand. The change would generate rising orders to factories, helping to support a rebound in the overall economy. The 1.7% drop in June inventories followed a 1.2% cut in May & marked a 10th straight drop. That record stretch surpassed the old mark of nine straight drops from June 01 to Feb. 02, in the last recession. The govt records go back to 92. The latest inventory drop left the inventory to sales ratio at 1.26, meaning it will take 1.26 months to exhaust stockpiles at the June sales pace. That's slightly lower than the 1.28 ratio in May but still well above the 1.11 inventory to sales ratio of a year ago. Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up 25% of all business stockpiles. Factories hold a third of inventories & retailers hold the rest. The 0.4% increases in sales in June & May were the first consecutive gains since sales rose for four straight months in March to June of 2008. Starting in July, sales had fallen every month until rising in May.