Falling exports to Asia accounted for some of the inventory buildup.

And the inventory buildup could be a drag in the fourth quarter if consumers slow down at the end of the year.

Still, he said, "This is not an economy that will overheat, nor experience a huge inventory buildup."

Prices are flat, home sales fall, resulting in inventory buildup.

The drop followed two months of inventory buildup to hedge against inflation.

The report on factory output had been expected, but the inventory buildup was a worrisome surprise.

Given recent poor retail sales numbers, analysts said the inventory buildup was probably involuntary.

Some analysts suggested that the inventory buildup might put a drag on the economy later this year.

"The growth last year was never as strong as we thought because of the massive inventory buildups," he said.

Recessions, he said, are "very often associated with inventory buildups, and then when it's over, the economy comes back."