Business Inventories Rise 0.2% in July

Business inventories, pushed up by a backlog of unsold cars, rose 0.2% in July as total business sales remained essentially unchanged, the government said Wednesday.

The Commerce Department said stockpiles held on shelves and back lots climbed to $676.2 billion in July, following a larger 0.5% increase in inventories in June.

Sales, meanwhile, were basically unchanged in July at $451.6 billion after a giant 1.2% jump in June. The flat overall sales figure included a 0.5% rise in retail sales, a 0.4% increase in wholesale sales and a 0.7% decline in sales by manufacturers.

In an advance report Tuesday, the government said retail sales rose 1.3% in August, the biggest advance in six months, but virtually all of the increase came in a big jump in auto sales.

A big factor in the inventory increase in July was a 0.5% jump in unsold cars on dealers’ lots, pushing car inventories 8.4% above where they were a year earlier. The high backlog of cars forced auto makers in August to offer new sales incentives programs.

Michael Evans, head of a Washington forecasting firm, said retail sales, excluding autos, have not increased at all in the past five months. He said that while the growth in inventories would boost overall economic activity in the current July-September quarter, it would likely depress activity in the final three months of the year.

Overall, inventories climbed 0.4% at both the retail level and the manufacturing level while posting a 0.5% drop at the wholesale level.

The combination of unchanged sales and rising inventories put the inventory to sales ratio up slightly in July at 1.50. It had been 1.49 in June. The new figure means it would take 1.5 months to exhaust inventories at the July sales pace.