US business inventories increased a bit more than expected in August even as sales surged, suggesting inventory investment could provide a lift to economic growth in the third quarter.

Business inventories rose 0.4 per cent after edging up 0.1 per cent in July, the Commerce Department said on Tuesday (Oct 17). Economists polled by Reuters had expected inventories to rise 0.3 per cent.

Inventories, a key component of gross domestic product, increased 1.0 per cent on a year-on-year basis in August.

Private inventory investment was neutral to GDP in the second quarter after being a major drag in the first three months of the year. Growth estimates for the third quarter are as high as a 5.1 per cent annualised rate. The economy grew at a 2.1 per cent pace in the April-June quarter.

Businesses are carefully managing inventory amid expectations of weaker demand because of higher interest rates.

Retail inventories increased 1.0 per cent in August, instead of 1.1 per cent as estimated in an advance report published last month. They advanced 0.5 per cent in July.

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Motor vehicle inventories accelerated 2.1 per cent, rather than 2.3 per cent as estimated last month. They increased 1.7 per cent in July. Retail inventories excluding vehicles, which go into the calculation of GDP, rose 0.5 per cent instead of 0.6 per cent as previously reported. They were unchanged in July.

Wholesale inventories slipped 0.1 per cent, while stocks at manufacturers rose 0.3 per cent.

Business sales shot up 1.3 per cent in August after gaining 0.8 per cent in July. At August’s sales pace, it would take 1.37 months for businesses to clear shelves, down from 1.39 months in July. REUTERS