A welcome 2.8 percent jump in dealer inventories in May fed a 0.7 percent build in retail inventories that in turn kept total business inventories, up 0.2 percent, from falling. Wholesale inventories were unchanged while manufacturing inventories fell 0.2 percent.

June's marginal total build followed an even more marginal 0.1 percent build in May; nevertheless, inventories in the second quarter look to be on track to add to GDP given steep contraction in the first quarter.

Business inventories in May are expected to rise 0.2 percent to match a 0.2 percent build in April.

Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth that won't generate inflationary pressures.

Rising inventories can be an indication of business optimism that sales will be growing in the coming months. By looking at the ratio of inventories to sales, investors can see whether production demands will expand or contract in the near future. For example, if inventory growth lags sales growth, then manufacturers will have to boost production lest commodity shortages occur. On the other hand, if unintended inventory accumulation occurs (that is, sales do not meet expectations), then production will probably have to slow while those inventories are worked down. In this manner, the business inventory data provide a valuable forward-looking tool for tracking the economy.