WASHINGTON, July 16 (Reuters) - U.S. business inventories increased moderately in May amid continued strength in sales, pushing the inventories-to-sales ratio to the lowest level since late 2021.

Inventories rose 0.3% after advancing 0.6% in April, the Commerce Department's Census Bureau said on Thursday. The gain in inventories, a key component of gross domestic product and one of the most volatile, was in line with economists' expectations. Inventories increased 3.1% year-on-year in May.

The inventory build has been moderate despite a strong increase in imports of goods during the first two months of the second quarter, suggesting solid underlying domestic demand. Inventories have been drawn down for four straight quarters.

Retail inventories rose 0.6% in May as estimated in an advance report last month. They gained 0.7% in April. Motor vehicle inventories increased 1.1% rather than 1.0% as previously reported. They rose 0.9% in April.

Retail inventories excluding autos, which go into the calculation of GDP, gained 0.3% instead of 0.4% as estimated last month. They advanced 0.7% in April. Wholesale inventories nudged up 0.1% while stocks at manufacturers climbed 0.2%.

Business sales increased 2.1% in May after advancing 1.4% in the prior month. At May's sales pace, it would take 1.28 months for businesses to clear shelves, the fewest since November 2021 and down from 1.30 months in April. The inventories/sales ratio was at 1.39 months in May 2025.