–Retail Auto Inventories Plunge 1.3% On Strong Sales
–Business Sales Up 1.4% in October On Wholesale, Retail

By Kevin Kastner

WASHINGTON (MNI) – The value of business inventories rose in
October for the tenth straight month, but a decline in retail
inventories offset the already announced increases in the value of
factory and wholesale inventories, data released Tuesday morning by the
Commerce Department showed.

The 0.7% rise in business inventories was below than the 1.0% gain
expected, with retail inventories down 0.6% due to declines in most
retail components, including a 1.3% decline in motor vehicle and parts
inventories.

The retail decline offset the already reported 1.9% rise in
wholesale inventories and the 0.9% gain in factory inventories.

The decline in retail inventories was likely due to a surge in
retail sales, which rose 1.8% with the food service and drinking places
component excluded.

The 1.3% drop in retail motor vehicle inventories accounted for
about half the decline in overall retail inventories, with the remaining
components down a combined 0.3% in month. There were declines in every
component except at clothing and department stores, perhaps due to extra
stocking prior to the holidays.

Overall business inventories would have been up 0.9% in October if
the drop in retail motor vehicle inventories was excluded, based on a
Market News International calculation.

Business sales rose 1.4% in October on gains in all three levels of
production, particularly the wholesale and retail sectors. Sales were up
sharply from year ago, running 7.3% ahead of their October 2009 pace
before seasonal adjustment and 9.3% after seasonal adjustment.

At the same time, inventories were 7.0% above their year-ago levels
before seasonal adjustment and up 6.9% after seasonal adjustment.

As a result of the large sales gain, the inventory-to-sales ratio
fell in October to 1.27 from 1.28 in September, as was below the 1.27
ration reported in October 2009.

With monthly inventory sales gains outpacing inventories, the data,
especially the inventory/sales ratio, suggest that businesses are
cautiously holding the line against overstocking despite signs of sales
improvement.

** Market News International Washington Bureau: 202-371-2121 **

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