RTTNews - Tuesday morning, the Commerce Department released its report on business inventories in the month of May, showing that inventories fell by a little more than economists had been expecting. The report also showed a modest decrease in business sales.

The report showed that business inventories fell 1.0 percent in May following a revised 1.3 percent decrease in April. Economists had expected inventories to fall by 0.8 percent compared to the 1.1 percent drop originally reported for the previous month.

With the decrease, inventories fell for the ninth consecutive month and were down 8.0 percent compared to the same month a year ago.

A 1.6 percent decrease in retailers' inventories contributed to the bigger than expected monthly decrease, while inventories at manufacturers and merchant wholesalers also fell by 0.6 percent and 0.8 percent, respectively.

While Peter Boockvar, equity strategist at Miller Tabak, said the bigger than expected decrease in inventories in April and May could have a negative impact on second quarter GDP estimates, he said the decreases should be more than offset by a positive contribution from trade.

As mentioned above, the Commerce Department also said that business sales edged down 0.1 percent in May after slipping 0.3 percent in the previous month. With the modest decrease, business sales were down 17.8 percent year-over-year.

A 0.9 percent drop in sales by manufacturers contributed to the modest decrease in total sales, more than offsetting increases in sales by retailers and merchant wholesalers, which rose 0.5 percent and 0.2 percent, respectively.

With inventories falling by much more than sales, the total business inventories/sales ratio edged down to 1.42 in May from 1.43 in April. The decrease took the ratio to its lowest level since October of 2008, although it is up from 1.27 a year ago.

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