U.S. retail inventories excluding autos rise in October

WASHINGTON - U.S. retail inventories excluding automobiles rose in October, suggesting inventories

could be less of a drag on fourth-quarter growth than previously thought.

Inventories are a key component of gross domestic product.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.4 percent in October after an unrevised 0.5 percent gain in September, the Commerce Department said on Friday. Overall business inventories were unchanged in October after ticking up 0.1 percent the prior month.

Economists polled by Reuters had forecast inventories edging up 0.1 percent in October after a previously reported 0.3 percent increase in September.

October's increase in retail inventories excluding autos could see economists raise their fourth-quarter GDP growth estimates, currently around a 1.9 percent annual pace.

A record back-to-back increase in inventories in the first two quarters of this year left warehouses bulging with unsold merchandise and businesses with little appetite to restock.

Inventories subtracted 0.56 percentage point from GDP in the third quarter, holding the economy to a 2.1 percent growth pace.

However, data earlier this month showed downward revisions to September manufacturing and wholesale inventories, suggesting the third-quarter GDP growth estimate could be lowered when the government publishes its second revision later this month.

A report on Thursday also showed less spending on services

and software than the government had assumed in its second estimate for third-quarter GDP.

In October, business sales fell 0.2 percent after being flat in September.

At October's sales pace, it would take 1.38 months for businesses to clear shelves, up from 1.37 months in September.

That was the highest ratio since June 2009 and suggested that the so-called inventory correction could persist beyond the fourth quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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