U.S. business inventories increase 0.6% in July – but sales decline

Businesses boosted inventories, or products waiting to be sold, rose by 0.6% in July in a sign the economy was growing steadily over the summer. Economists polled by The Wall Street Journal had forecast a 0.6% increase. Rising inventories adds to gross domestic product and usually reflect an expanding economy. The government said sales fell 0.9% in the month, however, and that could spell trouble if it persists. As a result, the ratio of inventories to sales rose to 1.32 from 1.30 in the prior month. That’s how many months it would take to sell all the inventory on hand. While the ratio is still fairly low, it’s been on a recent uptrend. That can happen when demand slows, potentially leaving companies stuck with unwanted goods that they have to discount to sell.