U.S. businesses managed to cut their inventories for the sixth straight month in July, while sales posted another increase.

The U.S. Commerce Department reported this morning business inventories fell by a seasonally adjusted 0.4% in July, following a 0.6% drop the month before, while business sales increased 0.4% in July after falling 1.5% in June.
Newport Communications Senior Economist Jim Haughey says this means that half the decline that was reported in industrial production during July was because businesses were selling out of inventory. However, he says, that still leaves some real decline in demand.
“There has been some weakening for exports as the rest of the world’s economy has slowed down in recent months,” Haughey says. “There has also been some nervousness and less spending by consumers. So as we start September we’re still in a spot where the economy is still on the bottom trying to get started up. We had a little bit of a start in August, but last week’s events may have put that on hold for a while.”
According to Haughey, the drop in inventories in July show, and August and September numbers will eventually show, that truck freight levels are pretty much flat. There are some bright spots in hauling automobiles and consumer packaged goods areas, but in the industrial hard goods and export areas it’s still fairly weak.
Haugey predicts that trucking companies that haul goods made by the manufacturing portion of the U.S. economy will still seek weak levels.
“It still looks like they will be on the upturn by the end of the year, but certainly not where they once were," Haughey says. "The key for them is inventories. The drop in July and others that I expect in August and September should put us at a point where production matches end-market consumption.”