Business stockpiles increased 0.4 per cent in July from June, the Commerce Department said Friday, after ticking up just 0.1 per cent the previous month. Total business sales rose 0.6 per cent in July, up from just 0.2 per cent in June.
Rising stockpiles can be a good sign for the economy because they suggest companies expect greater sales. Greater inventory building also means businesses ordered more goods, boosting factory production and economic growth. And higher sales mean that companies are less likely to be stuck with excess goods.
Business stockpiles in July stood at a seasonally adjusted $1.66 trillion, 3.2 per cent higher than a year ago.
Retail stockpiles grew 0.8 per cent, manufacturers increased theirs 0.2 per cent and wholesalers added just 0.1 per cent. Manufacturers account for about 40 per cent of business inventories, retailers about one-third and wholesalers the rest.
A separate report Friday showed that retail sales grew 0.2 per cent in August, the slowest pace in four months. Still, July's sales were revised higher to 0.4 per cent from 0.2 per cent. The figures suggested that consumer spending is growing at a steady but modest pace.
Faster restocking contributed nearly 0.6 percentage points to economic growth in the April-June quarter. The economy expanded 2.5 per cent at an annual pace in that period.
Still, economists forecast that growth will likely slow in the current July-September quarter to an annual rate of 2 per cent or less. Consumers remain cautious and businesses have cut back on their spending on industrial machinery and other factory goods.