US business inventories increase solidly in July

U.S. business inventories rose solidly in July, boosted by a larger than initially estimated increase in the stock of motor vehicles.

The Commerce Department said on Friday business inventories increased 0.6 percent after edging up 0.1 percent in June.

July's increase in inventories, which are a key component of gross domestic product, was in line with economists' forecasts.

Retail inventories increased 0.5 percent in July instead of rising 0.4 percent as reported in an advance estimate published last month. Retail inventories slipped 0.1 percent in June.

Motor vehicle inventories jumped 1.2 percent in July rather than 1.0 percent as reported last month. Auto inventories dipped 0.1 percent in June. Retail inventories excluding autos, which go into the calculation of GDP, gained 0.1 percent in July as estimated last month. They fell 0.1 percent in June.

There was an outright inventory liquidation in the second quarter. Inventories subtracted nearly a full percentage point from GDP in the April-June quarter. The economy grew at a 4.2 percent annualized rate in the second quarter, the fastest in nearly four years and almost double the 2.2 percent pace set in the January-March period.

Given strong domestic demand, businesses are likely to boost stocks of goods, which should underpin production at factories. Economists expect inventory accumulation to significantly contribute to GDP growth in the third quarter.

Business sales rose 0.2 percent in July after increasing 0.3 percent in June. At July's sales pace, it would take 1.34 months for businesses to clear shelves, up from 1.33 months in June.

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