Businesses added to their stockpiles in July for a 19th straight month and their sales increased by the most since March.
The Commerce Department says business inventories rose 0.4 percent in July following a similar gain in June. Business sales increased 0.7 percent in July.
The strong month for inventory growth shows businesses were confident in the economy despite weakening growth and dismal spending by consumers in the first half of the year. A more important sign will be how they reacted in August, when the stock market fluctuated wildly and the economy created no new jobs.
The government said in a separate report that retail sales in August showed no growth. Consumers pulled back during the turbulent month and Hurricane Irene disrupted sales along the East Coast.
U.S. manufacturing has been one of the strongest sectors of the economy since the recession ended. Efforts by companies to restock depleted shelves have spurred much of that factory production.
But manufacturing slowed in the spring, in part because of supply chain disruptions caused by natural disasters in Japan. U.S. companies had difficulty getting component parts, particularly for autos and electronics. Auto production and sales increased this summer, a sign that those disruptions may be easing.
The overall economy expanded at an annual rate of just 0.7 percent in the first six months of this year, the slowest growth since the recession ended two years ago. Employers added no net jobs in August, and the unemployment rate stayed at 9.1 percent.
Slower growth and poor hiring have raised concerns that the economy could fall back into a recession.
President Barack Obama last week urged Congress to pass a $447 billion package to boost job growth. The centerpiece of his plan is a deeper Social Security tax cut. He also wants to extend long-term unemployment benefits, adopt tax cuts for businesses that hire workers who have been unemployed for at least six months, and spend more on schools, roads and other public works.
The proposal is expected to meet stiff resistance from Republicans, who say the president's policies have failed to help the economy. They also object to his plan to pay for the package with tax increases on higher income individuals, hedge fund managers and oil companies.
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