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US business inventories increase modestly in May

[WASHINGTON] US business inventories rose modestly in May, suggesting restocking will probably not contribute to economic growth in the second quarter.

The Commerce Department said on Tuesday business inventories rose 0.3 per cent after an unrevised 0.4 per cent increase in April. The increase was in line with expectations.

Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, edged up 0.1 per cent in May.

April's retail inventories excluding autos were revised down to show them increasing 0.5 per cent instead of 0.6 per cent.

Inventories contributed 0.45 per centage point to GDP in the first quarter and economists do not expect restocking to add to output in the second quarter.

In May, business sales rose 0.4 per cent after increasing 0.5 per cent in April. At May's sales pace, it would take 1.36 months for businesses to clear shelves - a relatively high ratio that suggests limited scope for businesses to aggressively accumulate stocks. The ratio was unchanged from April.