U.S. business inventories fall 1.0 percent in July

WASHINGTON (Reuters) - U.S. business inventories fell 1.0 percent in July, pushing the dollar amount to the lowest level since March 2006, a government report showed on Tuesday.

The Commerce Department said inventories declined to $1.33 billion. Economists polled by Reuters had expected a 0.9 percent decline, after a 1.4 percent fall in June that was initially reported as a 1.1 percent drop. Compared to June last year, business inventories were down 11.8 percent, the department said

Motor vehicles and parts inventories fell 2.1 percent in July after dropping 3.1 percent in June.

Business sales edged up 0.1 percent in July after rising 1.1 percent in June. Sales were down 17.8 percent from July last year.

The small increase in sales left the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, at 1.36 months' worth from 1.38 in June. It was the lowest ratio since a matching 1.36 in October 2008.

Analysts expect the rebuilding of inventories -- a critical component of changes in gross domestic product over the business cycle -- to pull the economy out of recession, starting in the third quarter of this year.

The recession began in December 2007 and there are signs the economy is in the early stages of recovery.

Business inventories plunged a record $159.2 billion in the April-June period after dropping $141.1 billion in the first quarter, according to data in the gross domestic product report.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)