U.S. business inventories rose a lower-than-expected 0.3% in May, the U.S. Commerce Department announced Tuesday.

Economists surveyed by Bloomberg News had expected March 2008 inventories to rise 0.4%.

Further, inventories are now up 5.2% from May 2007, the Commerce Department said. The April business inventory statistic was revised higher to 0.5%.

Meanwhile, the inventory-to-sales ratio declined to 1.24. A year ago, the ratio was 1.26.

Economist David H. Wang told BloggingStocks Tuesday the May inventory data can be interpreted two ways, with with positive or negative dimensions, depending on how one views the current corporate stance toward the U.S. economy, and the prospects for economic growth in the quarters ahead.

On the one hand, businesses are keeping inventories at a bare minimum -- a fact that typically is bearish, short-term, for the U.S. economy, Wang said.

U.S. business sales increased 1.4% in April - - the fastest pace in five months - - outpacing inventory growth and leaving businesses with small inventory levels, the U.S. Commerce Department announced Thursday.

Sales have increased 6.8% since April 2007.

Meanwhile, inventories increased a modest 0.5% in April, above the 0.3% consensus estimate of economists surveyed by Bloomberg News. Inventories have increased 5.4% since April 2007.

Further, the April business inventory-to-sales ratio declined to 1.25, with the typical company now possessing about a 38-day supply of goods in storage/inventory rooms. A year ago, in April 2007 the inventory-to-sales ratio was 1.27.

U.S. business inventories rose a scant 0.1% in March 2008 (pdf), the U.S. Commerce Department announced Tuesday -- the smallest inventory rise in a year.

Economists surveyed by Bloomberg News had expected March 2008 inventories to rise 0.5%.

Also, the March 2008 inventory-to-sales ratio declined to 1.27. Meanwhile, the February 2008 business inventory statistic was revised higher to an increase of 0.2%.

Inventories: Two-sided stat

Economist David H. Wang told BloggingStocks Tuesday the March 2008 inventory data can be interpreted two ways, with positive and negative dimensions.

On the one hand, businesses are keeping inventories at a bare minimum -- a fact that typically is bearish, short-term, for the U.S. economy, Wang said. "It can reflect a lack of business confidence in the economy's ability to grow in the short run," he said.

On the other hand, those same lean inventories mean that any sustained increase in demand will require businesses to ramp-up production quickly -- a phenomenon that generally limits the length of a recession / economic downturn, Wang said.

Another positive dimension to lean inventories: companies will not have to trim as many employees if the U.S. economy slows further. "In all, this month's inventory report contained a lukewarm stat," Wang said. "The best aspect of it is, businesses are prepared for a further downturn in the economy, should it occur."

U.S. business inventories increased 0.6% in February 2008 to $1.468 trillion, the U.S. Commerce Department announced Monday.

Economists surveyed by Bloomberg News had expected inventories to increase by 0.6% in February 2008.

Meanwhile, sales declined 1.1% in February 2008, the category's largest drop since January 2007.

Also, the inventory-to-sales ratio, an indicator of demand, increased to 1.28 in February 2008 from 1.26 in January 2008.

Economists, business executives, monetary officials and investors/traders monitor the inventories statistic because it can indicate business optimism and/or growing sales in the months ahead.

Further, the ratio of inventories-to-sales can help investors determine whether production demand will expand or contract in the near future -- a major factor in U.S. GDP growth.

Economic Analysis: A sub-par February 2008 business inventories report. The key statistic is the 1.28 inventory-to-sales ratio, which continues to increase. It's been rising since late 2007 -- and a sustained rise historically indicates, at minimum, economic sluggishness up ahead; at worst, a recession. For example, the ratio increased throughout 2001, prior to the start of the U.S.'s last recession. Conversely, it decreased throughout the ensuing, nearly 6-year economic expansion.