Business Inventories Down in July

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Inventories (search) at U.S. businesses dipped in July amid strong sales, the government said on Monday in a report that suggested companies might need to boost output to keep up with demand.

Inventories at the nation's manufacturers, retailers and wholesalers slipped 0.1 percent in July to a seasonally adjusted $1.18 trillion, the Commerce Department (search) said. The report was close to expectations on Wall Street for a drop of 0.2 percent.

The decline brought the closely watched inventories-to-sales ratio (search) — a measure of how many months it would take to deplete stockpiles at the current sales pace — down to a record low 1.37 from 1.39 in June.

Businesses have kept inventories at historically lean levels over the past year as they awaited a decisive pickup in demand. In the second quarter, businesses cut stockpiles by $20.9 billion, a reduction that weighed on economic growth.

Amid mounting signs the economy is accelerating, analysts expect businesses to soon begin restocking shelves and warehouses, which would give a boost to production and further bolster growth.

Total business sales rose 1.6 percent in July, while retail sales rose 1.4 percent.

While overall inventories slipped, retail inventories grew 0.3 percent both overall and excluding motor vehicles. Auto inventories rose 0.3 percent in July after a hefty 0.6 percent gain a month earlier.

As previously reported, manufacturing inventories fell 0.5 percent and wholesale inventories were unchanged in July.