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By Mark Felsenthal
WASHINGTON (Reuters) - U.S. wholesale inventoriessurged the most in two years in July, adding to signs thateconomic growth in the third quarter of the year may prove abit stronger than many forecasters had expected.
Inventories jumped 1.3 percent, the steepest gain sinceJuly 2008, the Commerce Department said Friday. Analysts hadexpected a rise of just 0.4 percent.
The broad-based gains in July led some analysts to bump uptheir forecasts for third-quarter Gross Domestic Productslightly. Financial markets, however, paid little attention tothe report.
A restocking of inventories has helped drive the economy'srecovery. But some analysts have said slowing demand has likelyleft businesses with ample stocks and they expect the boostfrom inventories to fade in the second half of the year.
"While it is early in the quarter and only one sector ofthe economy, today's report suggests that inventoryaccumulation will continue to support GDP growth in Q3," PeterNewland of Barclays Capital in New York said in a note toclients.
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A quickened pace of inventory accumulation had accountedfor 0.6 percentage point of the economy's 1.6 percent annualgrowth rate during the second quarter.
A Reuters poll Wednesday showed analysts had scaled backtheir forecasts for third-quarter growth to an annualized 1.8percent from 2.4 percent in an August poll.
While the economy still seems stuck in a slow-growth path,data in recent days has suggested a bit more economic vigorthan forecasters had expected.
Private sector job growth in August surprised to theupside, and reports Thursday showed a narrower-than-expectedtrade gap in July and a bigger drop in claims for joblessbenefits last week than forecast.
Friday's report showed wholesale sales rose by alarger-than-expected 0.6 percent in July.
However, the sales increase followed declines in June andMay, suggesting a portion of July's inventory gains may havebeen unintended. Some analysts said sales would need to staystrong to support continued inventory building.
"In general there has been an increase in inventories at atime when the economy is slowing down," said Brian Bethune, aneconomist with IHS Global Insight in Lexington, Massachusetts."Something's gotta give here. Either the economy picks up orproduction has to be cut."
The inventory-to-sales ratio, which measures how long itwould take to clear shelves at the current sales pace, edged upto 1.16 months' worth. It was the highest since February, butwas down from 1.27 months' worth a year ago. (Editing by Dan Grebler)