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Business inventories rise less than expected in December

WASHINGTON (Reuters) - Business inventories edged up in December as sales pushed higher, confirmation that a slow pace of warehouse restocking weighed on fourth-quarter economic activity.

The Commerce Department said on Wednesday inventories gained 0.1 percent after rising 0.2 percent in November.

Economists polled by Reuters had expected inventories to rise 0.3 percent. Automobile inventories increased 0.8 percent after increasing 0.5 percent in November.

Inventories are a key component of gross domestic product changes. Retail inventories, excluding autos - which go into the calculation of gross domestic product - were up 0.3 percent after rising by the same margin the prior month.

That was broadly in line with the assumption made by the government in its advance estimate for fourth-quarter gross domestic product published last month. A sharp slowdown in the pace of inventory accumulation contributed to GDP shrinking at a 0.1 percent annual pace in the final three months of 2012.

However, the trade deficit in December was not as big as the government had assumed in its initial GDP estimate and core retail sales in November and December were higher than previously estimated.

Taken together, that suggests output is likely to be revised higher when the government publishes its second growth estimate later this month.

The slower pace of stock accumulation in the fourth quarter bodes well for first-quarter GDP prospects. In December, business sales rose 0.3 percent after increasing 0.9 percent the prior month.

At December's sales pace, it would take 1.27 months for businesses to clear shelves, down from 1.28 months in November. The inventory to sales ratio was the lowest since May last year.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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