Wholesale Inventories, Sales Both Fall, but Ratio Rises

Sales of wholesale goods fell 1.3% in September, with inventories themselves only dropping by 0.1%, as reported by the Department of Commerce.

At the same time, even as the U.S. economy at-large continues grinding towards recession, U.S. industry still managed to increase productivity in the third quarter, according to a report by the Department of Labor.

The drop in sales was the largest since March.

While both inventories and sales both fell, the inventory-to-sales ratio rose for the month to 1.32 months -- up .02 from August. The ratio measures how long goods can be expected to sit on store shelves before being sold.

A low inventory-to-sales ratio is good because the trucking industry derives much of its business from delivering goods to stores. When stores have stockpiles sitting around, they have no need to place new factory orders, which lowers demand for trucking services.

Companies have attempted to adjust to the economy slowdown by selling out of their stockpiled items and reduce their inventories. Experts said that if sales continue to be slow, it will be difficult for wholesalers to reduce their inventories and that could lead to fewer orders and thus extend the manufacturing slump, Bloomberg reported.

Productivity rose 2.2% in the business sector and 2.7% in the non-farm business sector, the Labor Dept. report said.

“In both the business and the non-farm business sectors, productivity increases in the third quarter occurred because hours fell more than output,” the report said.

Analysts had expected a 2% increase, according to Bloomberg.

he increased productivity was attributed to business’ slashing employee hours at the fastest rate in decades, the Associated Press said, along with massive job cuts aimed at dealing with a weakening economy.

In the manufacturing sector, a particularly important area for the trucking industry, overall productivity rose 1.1%. This increase was spearheaded by a 2.5% increase in productivity in durable goods manufacture.

The trucking industry relies on manufacturing because it receives a good deal of business from manufacturers. Factories rely on trucks to deliver raw materials and to pick up finished goods and take them to retailers.

Also in the report, labor costs rose at a 1.8% rate, this is down from the previous quarter’s 2.6% rate. Labor costs are an indicator of inflationary pressure.

Experts had projected a 2.4% increase in labor costs, Bloomberg reported.