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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

July Inventories Drop, Sales Rise

In a nice little blip of good news, July inventories dropped and sales rose, according to numbers released moments ago by the Commerce Department, fueling hopes of the beginning of a recovery.

In July, businesses slashed their inventories 1 percent, slightly more than expected, marking the 11th straight month of inventory reduction.

At the same time, sales rose by just the tiniest amount -- 0.1 percent -- after rising 1.1 percent in June. Statistically meaningless, however, it marks the first back-to-back monthly increases in sales in a year.

This sales number, by the way, is different from retail sales, which was reported today.

In a recession, businesses reduce inventory any way they can; typically by discounting prices. This means factories shut down.

Once, however, businesses get their inventory overhang down to a workable amount -- meaning, their shelves are actually starting to a look a little bare -- they will start putting orders back in to factories, which will start up again and hire back laid-off workers.

-- Frank Ahrens
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By Frank Ahrens  |  September 15, 2009; 10:26 AM ET
Categories:  The Ticker  | Tags: inventories, manufacturing  
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Comments

Inventories have dropped because there is little to choose from. Meaning,apparently there is little restocking going on. It is wise to take care of those favorite jeans, those stylish designer brands may not be around in the future.

Posted by: alwaysAlabama | September 15, 2009 5:05 PM | Report abuse

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