Newspaper article THE JOURNAL RECORD

Business Inventories Up Fifth Straight Month

Newspaper article THE JOURNAL RECORD

Business Inventories Up Fifth Straight Month

Article excerpt

WASHINGTON (AP) _ Businesses built up their stockpiles at a rapid pace in August despite the fastest sales in 7 years.

Inventories rose 1 percent, the fifth consecutive advance and the biggest since 1.2 percent in May, the Commerce Department said Monday. Sales rose 3 percent as auto dealers restocked following a July shutdown to retool for 1995 models.

Analysts said the figures are fresh evidence of economic strength, increasing the chances the Federal Reserve will raise interest rates again next month.

"I'm a little bit surprised the accumulation is so high," said economist Sung Won Sohn of Norwest Corp., a Minneapolis bank. "But much of it was due to automobiles. Earlier this summer, Detroit was short of cars because of retooling and the demand for hot-selling cars."

Sung said there may have been some involuntary buildup by retailers, particularly at clothing and department stores, where apparel sales have been lagging.

Still, analysts said the inventory increase probably will inflate the economic expansion in the third quarter to around 3 percent, making another boost in short-term interest rates by the Federal Reserve more likely when central bank policy-makers meet next month. The Fed has raised rates five times this year.

The government's first estimate of gross domestic product for the third quarter is due Oct. 28.

The inventory accumulation "is stronger than expected," added economist Marilyn Schaja of Donaldson, Lufkin Jenrette Securities Corp. in New York City. "The economy continues to push along."

Analysts generally had predicted inventories would increase 0.4 percent in August, less than half the actual bulge.

The Commerce Department said inventories totaled a seasonally adjusted $903.6 billion in August, up from $894.7 billion.

Inventories rose 0.6 percent in July and 0.4 percent in June. …

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