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U.S. inventories steady
July 16, 2001: 9:32 a.m. ET

Unsold goods levels stall in May, but sales rise for first time in months
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NEW YORK (CNNfn) - Inventories at U.S. businesses were unchanged in May, though sales rose for the first time since December, the government said Monday, as businesses tried to work off their unsold goods.

Inventory levels were unchanged at $1.2 trillion in May, the Commerce Department reported, missing the forecast of economists polled by, who expected inventories to fall 0.1 percent.

But the government revised its reading for April, saying inventories fell 0.2 percent in the month, compared with its previous report that inventories were unchanged.

Meanwhile, sales rose 1.1 percent in May, the biggest increase since a 1.9-percent rise in March of 2000 and the first rise since sales rose by 0.3 percent in December. Sales fell by 0.5 percent in April.

The report also showed that the inventory-to-sales ratio, which measures how long it would take businesses to exhaust their inventories at May's sales pace, dipped to 1.42 months in May from 1.44 in April.

Inventories affect the economy

If companies can unload their backlog of goods, they may be able to increase production in the near future and possibly help end a U.S. economic slowdown that has led to a drastic reduction in corporate spending and hundreds of thousands of job cuts this year.

"These data suggest that a bottoming in economic activity is taking place, but a bit more inventory adjustment is needed to insure a re-acceleration in growth," said Steven Wood, economist with FinancialOxygen.

The Federal Reserve has cut its target for short-term interest rates six times this year in an aggressive campaign to keep money flowing through the U.S. economy and avoid a recession.

Fed Chairman Alan Greenspan has attributed much of the economy's weakness to an effort by businesses to cut back quickly on production to bring inventories back in line with sales. graphic

-- from staff and wire reports


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