The Commerce Department announced Monday that the nation's businesses added to their inventories in July, stockpiling goods for a third consecutive month.

The announcement suggests an increased optimism on the economic outlook for the country. Retailers, manufacturers and wholesalers reported inventories that rose a stronger-than-expected 0.4% in July, the Commerce Department said. Economists had expected a rise of only 0.1%.
Businesses were able to increase inventories in July even as sales rose a strong 1.2%, the biggest gain since April. The sharp rise in sales helped push the closely watched stocks-to-sales ratio down to 1.35 (the number of months it would take to deplete inventories at the current sales pace.) That matched the record low it hit in April under government records dating back to the beginning of 1992.
Big factors in July's gain include automobile dealers who stocked up on cars and trucks to meet consumer demand stoked by free financing and other incentives. Furniture, electronic and appliance stores also added briskly to their inventories.
The report offered a sign that businesses, which had been slashing inventories from February 2001 through April of this year, are looking forward to further gains in sales.
Inventories-to-sales ratios have been hovering at historic lows for months and many economists expect production to pick up as firms try to restock depleted shelves.
The rise in inventories in July reflected a sharp 1.8% increase in auto showroom inventory. But despite that rise, strong auto sales meant the stocks-to-sales ratio at auto dealers actually fell.