U.S. Business Inventories See Modest Increase in July

According to government data, U.S. business inventories saw a modest rise in July amid increasing sales.

The Census Bureau of the Commerce Department reported on Tuesday that inventories grew by 0.2% in July following a similar increase in June. Inventories, a key component of gross domestic product (GDP), are among its most volatile elements. On a year-over-year basis, inventories rose by 1.5%.

In the second quarter, inventories declined at an annual rate of $32.9 billion, subtracting 3.29 percentage points from GDP growth. However, this was more than offset by a record contribution of 4.95 percentage points from a narrower trade deficit.

After contracting at a 0.5% rate in the first quarter, the economy expanded at an annual rate of 3.3% in the second quarter. The Atlanta Federal Reserve currently estimates that GDP will grow by 3.1% in the third quarter.

A preliminary report published last month also showed that retail inventories rose by 0.2% in July, following a similar 0.2% increase in June.

Motor vehicle inventories increased by 0.5%, an upward revision from the previously reported 0.3%. In June, this category rose by 0.9%. Retail inventories excluding automobiles — which are included in GDP calculations — rose by 0.1% in the initial report.

Wholesale inventories increased by 0.1% in July, while manufacturers’ inventories rose by 0.3%.

After a 0.7% rise in June, business sales grew by 1.0% in July. At the current sales pace, businesses would take 1.37 months to clear their inventories, slightly lower than 1.38 months in June.