Cautious US businesses kept inventories unchanged in August; sales fell from July

WASHINGTON – U.S. businesses kept their stockpiles unchanged and registered lower sales in August, numbers that could weigh on third-quarter economic growth.

The Commerce Department said Wednesday that business inventories were flat from July. Sales slid 0.6 per cent, the biggest drop since a 2.3 per cent fall in January. August sales were down 3.1 per cent from a year earlier, and inventories were up 2.4 per cent from August 2014.

Firms’ caution in building inventory could be a drag on economic growth in the July-September quarter. Economists are expecting growth to slow in the second half of the year from the robust 3.9 per cent annual growth rate recorded from April through June.

Commerce reported earlier in the day that retail sales rose just 0.1 per cent in September, held down by plummeting gasoline prices and a strong dollar that made imported goods cheaper.

An economic slowdown in China has clouded the global business outlook, driving down prices of commodities and rattling financial markets. The Federal Reserve cited weakness in the global economy when it decided last month to delay a long-anticipated increase in short-term interest rates, which it has kept near zero since December 2008. The International Monetary Fund has urged the Fed to delay a rate hike until next year.

Worried about the prospects for emerging market economies, investors have flocked to the U.S. dollar, driving up the American currency and putting U.S. exporters at a price disadvantage in foreign markets.