Ahead of the Bell: US business inventories

WASHINGTON -- U.S. businesses likely increased their stockpiles in August, a sign of higher confidence in the economy.

Economists were looking for business stockpiles to rise by 0.5 percent. The Commerce Department will release the report at 10 a.m. EDT on Monday.

In July, companies restocked their shelves at the fastest pace since January while their sales increased.

The biggest growth in stockpiling was among retailers and auto dealers. Stockpiles at manufacturers and wholesalers rose more slowly in July.

Companies typically boost their stockpiles when they anticipate sales will rise in coming months. Faster restocking helps drive economic growth. When businesses order more goods, it typically leads to more factory production.

Total business stockpiles rose to $1.59 trillion in July. That was nearly 21 percent higher than the low reached in September 2009.

The economy grew at a sub-par annual rate of just 1.3 percent in the April-June quarter and many economists think that growth in the July-September period will be only slightly improved at around 2 percent. Growth at that level is not strong enough to make a sustained improvement in unemployment.

The unemployment rate did drop to 7.8 percent in September, the lowest it has been since January 2009. But some economists are concerned that the rate could start rising again if job growth doesn't improve more.

The Federal Reserve in September announced a number of actions including launching another round of bond purchases aimed at driving interest rates lower and improving economic growth. The Fed said it would keep up its efforts until it saw a substantial improvement in unemployment.

Wholesale stockpiles account for about 27 percent of total business inventories. Stockpiles held by retailers make up about one-third of the total and manufacturing inventories represent about 40 percent.