updated 9/12/2008 10:44:07 AM ET 2008-09-12T14:44:07

Business inventories shot up in July by the most in four years as sales slowed.

The Commerce Department says that businesses' supplies of unsold goods in warehouses and stock rooms rose by 1.1 percent in July. Economists were expecting a 0.5 percent gain. It marked the biggest increase since July 2004.

The increase in inventories came as business sales rose by a smaller-than-expected 0.5 percent in July, down from a 1.7 percent rise in June. Economists expected a 1.4 percent gain for July.

Businesses have been struggling to get a firm handle on customer demand. Consumers — somewhat energized by the government's tax rebates in the spring — have been pulling back amid rising unemployment, shrinking paychecks, and fallout from the housing and credit crises.

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