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Warehouse workers deal with inventory stacked up to the ceiling at an ABT Electronics Facility in Glenview, Illinois, U.S. December 4, 2018. REUTERS/Richa Naidu

WASHINGTON, Sept 15 (Reuters) - U.S. business inventories increased in July, but the pace has slowed considerably from prior months, likely as cooling demand amid higher interest rates forces companies to be cautious.

Business inventories increased 0.6% after rising 1.4% in June, the Commerce Department said on Thursday. Inventories are a key component of gross domestic product. July's increase was in line with economists' expectations.

Retail inventories increased 1.2% in July, instead of 1.1% as estimated in an advance report published last month. That followed a 2.0% increase in June.

Motor vehicle inventories raced 3.5% as estimated last month. They climbed 3.3% in June.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.4% as estimated last month.

A sharp slowdown in the pace of inventory accumulation in the second quarter relative to the January-March quarter's brisk rate weighed on GDP last quarter. The economy contracted at a 0.6% annualized rate in the second quarter after shrinking at a 1.6% pace in the January-March period.

Business sales dropped 0.9% in July after rising 1.2% in June. At July's sales pace, it would take 1.32 months for businesses to clear shelves, up from 1.30 in June.

Source: Reuters

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