Sept. 15 (Bloomberg) -- Inventories at U.S. businesses fell in July for an eleventh straight month as a gain in sales helped companies trim excess supply.

Stockpiles declined 1 percent, exceeding economists' forecasts, to $1.33 trillion, the lowest level since March 2006, figures from the Commerce Department showed today in Washington. Sales climbed 0.1 percent after a 1.1 percent gain in June.

Another Commerce report today showed retail sales jumped last month by the most in three years, adding to evidence the worst recession since the 1930s is ending. A record inventory drawdown in the first half of 2009 means manufacturers may boost output to fill orders as businesses replenish supplies.

``It looks like the ramping up of production is going to continue after industries see that the consumer is back in the game,'' Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.

Economists projected inventories would fall 0.9 percent, according to the median estimate in a Bloomberg News survey. Forecasts ranged from declines of 0.5 percent to 1.4 percent.

Sales showed the first back-to-back gain in a year.

The stretch of declines in inventories is the longest since 2002. Commerce revised June's drop to 1.4 percent, more than previously estimated.

It would take 1.36 months to deplete stockpiles at the current sales pace, the fewest since October and down from 1.38 months in June.

Retail Stockpiles

Retailers' inventories, the only part of today's release on stockpiles that was not previously reported, decreased 1 percent after a 1.2 percent drop the prior month.

A Commerce Department report earlier today showed retail sales surged 2.7 percent in August, exceeding forecasts and the biggest gain since January 2006. The increase was spurred by a government rebate program for automobile purchases. Excluding autos, sales climbed 1.1 percent, also more than anticipated.

Retail inventories account for almost 33 percent of all business inventories. Factory stockpiles fell 0.7 percent and inventories at wholesalers dropped 1.4 percent in July.

Stockpiles at auto dealers decreased 2.1 percent, while sales increased 1.5 percent.

Total business inventories shrank at a record $159.2 billion annual rate in the second quarter, subtracting 1.4 percentage points from gross domestic product, the government reported Aug. 27. Stockpiles dropped at a $113.9 billion pace in the first quarter.

Economic Slump

The world's largest economy contracted 1 percent from April through June, according to the Commerce Department. The drop was the fourth in a row, making it the longest contraction since quarterly records began in 1947.

Businesses that are drawing down inventories to cut costs and boost profits include Cincinnati-based Macy's Inc., the second-largest U.S. department-store company. Chairman and Chief Executive Officer Terry Lundgren said last week that Macy's is seeing more stable sales and has reduced its inventories significantly.

``We are seeing some stabilization ourselves,'' Lundgren, 57, told Bloomberg Television. ``We have a much better handle now on where we are headed.''

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: September 15, 2009 10:00 EDT