U.S. business inventories fell by a bigger-than-expected 1.5 percent in August, the largest fall since last December, according to a government report on Wednesday that showed businesses were still slashing stocks of unsold goods to cope with weak demand.
The Commerce Department said inventories fell to $1.31 billion, the lowest since December 2005. Economists polled by Reuters had expected a 0.9 percent decline, after a 1.1 percent fall in July that was initially reported as a 1 percent drop.
Compared to August last year, business inventories were down 13.3 percent, the department said.
Motor vehicles and parts inventories dropped 7.9 percent in August, the largest decline since October 2001, after falling 2.3 percent in July.
Business sales rose 1.0 percent in August after increasing 0.3 percent the previous month. Sales were down 15.1 percent from August last year.
The rise in sales left the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, at 1.33 months' worth from 1.36 in July. It was the lowest ratio since September last year.
Analysts believe a slowdown in the pace of inventory liquidation helped to lift the economy out of its worst recession since the Great Depression in the third quarter of this year.
The recession began in December 2007 and inventories are a critical component of changes in gross domestic product over the business cycle.
Business inventories dived a record $160.2 billion in the April-June period after dropping $113.9 billion in the first quarter, according to data in the gross domestic product report.
