Domestic wholesale inventories gain in July

WASHINGTON - U.S. wholesale inventories surged the most in two years in July, adding to signs that economic growth in the third quarter of the year may prove a bit stronger than many forecasters had expected.

Inventories jumped 1.3 percent, the steepest gain since July 2008, the Commerce Department said Friday. Analysts expected a rise of just 0.4 percent.

The broad-based gains in July led some analysts to bump up their forecasts for third-quarter gross domestic product slightly. Financial markets, however, paid little attention to the report.

A restocking of inventories has helped drive the economy's recovery. But some analysts have said slowing demand has likely left businesses with ample stocks and they expect the boost from inventories to fade in the second half of the year.

Friday's report showed wholesale sales rose by a larger-than-expected 0.6 percent in July.

However, the sales increase followed declines in June and May, suggesting a portion of July's inventory gains may have been unintended. Some analysts said sales would need to stay strong to support continued inventory building.

"In general, there has been an increase in inventories at a time when the economy is slowing down," said Brian Bethune, an economist with IHS Global Insight in Lexington, Mass.

While the economy still seems stuck in a slow-growth path, data in recent days have suggested a bit more economic vigor than forecasters had expected. Private-sector job growth in August did better than expected, and reports Thursday showed a narrower-than-expected trade gap in July and a bigger drop in claims for jobless benefits last week than forecast.

- Reuters