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U.S. business inventories up, sales post largest drop in 10 months

An employee at the new CityTarget store checks stock on the shelves during preparations for its opening in downtown Chicago July 18, 2012. R
An employee at the new CityTarget store checks stock on the shelves during preparations for its opening in downtown Chicago July 18, 2012. R

WASHINGTON (Reuters) - U.S. business inventories rose in January, but a drop in sales meant it was now taking the longest time since late 2009 to move goods from shelves.

The Commerce Department said on Thursday inventories rose 0.4 percent after increasing 0.5 percent in December.

Economists polled by Reuters had forecast inventories increasing 0.4 percent in January.

Inventories are a key component of gross domestic product changes. Retail inventories, excluding autos, which go into the calculation of GDP, gained 0.7 percent.

That was the largest gain since last July and followed a 0.6 percent rise in December.

Businesses accumulated a massive amount of stock in the second half of the year, some of which ended up piling up in warehouses. As a result, they are expected to order fewer goods, which economists say will undercut first-quarter growth.

Inventories added only 0.1 percentage point to the fourth-quarter's 2.4 percent annualized growth rate.

Business sales fell 0.9 percent in January, the largest drop since March last year. Sales had slipped 0.1 percent in December. Some of the weakness in sales could be weather- related.

At January's sales pace, it would take 1.32 months for businesses to clear shelves, up from 1.30 months in December. It was the highest inventory-to-sales ratio since October 2009.

(Reporting by Lucia Mutikani; Editing by James Dalgleish)

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