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US business inventories rise 0.4%, beat estimates

Palettes of products are displayed at a Costco Wholesale Corp. store, Hackensack, New Jersey.
Ron Antonelli | Bloomberg | Getty Images

U.S. business inventories posted their largest increase in six months in July, suggesting restocking could provide a boost to third-quarter economic growth.

The Commerce Department said on Friday inventories increased 0.4 percent after edging up by a revised 0.1 percent in June.

Economists polled by Reuters had forecast inventories rising 0.2 percent in July after being previously reported as having been flat in June.

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Inventories are a key component of gross domestic product changes. Retail inventories, excluding autos — which go into the calculation of GDP — increased 0.8 percent after slipping 0.1 percent in June. July's increase was the largest since January.

Inventories added 0.59 percentage point to the second quarter's 2.5 percent growth pace.

Businesses have been wary of ramping up stock accumulation after consumer spending slowed in the April-June period. They appear to be stocking up for the holiday season.

Business sales advanced 0.6 percent in July after rising 0.2 percent the prior month. At July's sales pace, it would take 1.28 months for businesses to clear shelves, down from 1.29 months in June.

July's inventory-sales-ratio was the lowest since May last year.