June Business Inventories fell 1.1%, .2% more than expected and May was revised lower by .2% to a drop of 1.2%. Because sales rose by .9%, the inventory to sales ratio fell to 1.38 from 1.41 and is at the lowest level since Oct ’08 when it was 1.36. In addition to the drop in wholesale inventories that we saw on Tuesday, inventories at the manufacturing and retail level also fell. In particular, inventories in the auto’s and parts category fell by 2.8% and are down 23% y/o/y. This will reverse in Q3 as auto manufacturers somewhat normalize their inventories due to the demand from the clunker plan. Ford is on the tape right now saying they will boost NA production by another 10,000 units in Q3 to meet demand and the planned production is up 18% y/o/y. Today’s June data is old news but it captures how Q2 ended and it will result in a revision lower to Q2 GDP #’s, partially offset by a lower than expected June trade figure.
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