Business inventories posted their largest gain in six months in July, boosted by an increase in automobile stocks, according to a government report that could be a lift to third-quarter economic growth.
The Commerce Department said on Friday inventories increased 0.8 percent to a record $1.59 trillion, after edging up 0.1 percent in June. Economists polled by Reuters had forecast inventories rising only 0.3 percent in July.
Inventories in July were lifted by a 2.7 percent jump in stocks at auto dealers as sales recovered modestly after slipping the previous month. Auto inventories had increased 2.2 percent in June.
Inventories are a key component of gross domestic product changes. Inventories, excluding autos -- which go into the calculation of gross domestic product -- rose 0.5 percent after nudging up 0.1 percent in June.
Business inventories were a drag on second-quarter gross domestic product growth and July's better-than-expected increase could be a good sign for growth this quarter.
Business sales rebounded 0.9 percent to $1.24 trillion in July after falling 1.2 percent the prior month. July's sales increase was the largest since December.
At July's sales pace, it would take 1.28 months for businesses to clear shelves, down slightly from 1.29 months in June.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)