Posted by Joseph Y. Calhoun, III

Inventories fell again in August:

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $989.6 billion, up 1.0 percent (±0.2%) from July 2009 and down 15.1 percent (±0.4%) from August 2008.

Inventories. Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,311.4 billion, down 1.5 percent (±0.1%) from July 2009 and down 13.3 percent (±0.4%) from August 2008.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of August was 1.33. The August 2008 ratio was 1.30.

We’ve still got a ways to go on the inventory to sales ratio. I suspect we’ll need to see the ratio drop to at least 1.3 before we see much increase in production to replenish inventories. Moving in the right direction, but we aren’t there yet.