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U.S. wholesale inventories rise more than expected

WASHINGTON (Reuters) - U.S. wholesale inventories rose more than expected in August, suggesting that restocking was less of a drag on economic growth on the eve of a fiscal battle in Washington than analysts had thought.

The Commerce Department said on Friday wholesale inventories rose 0.5 percent in August, the biggest increase since January. The government also said inventories rose more than initially estimated in July.

Gross domestic product expanded at a 2.5 percent annual pace in the April-June period, and most analysts expect a significant slowdown in the third quarter. A government shutdown that left hundreds of thousands of people out of work for weeks this month is expected to make the fourth quarter even weaker.

Economists expect the pace of inventory accumulation to slow a bit in the July-September quarter after consumer spending moderated in the previous quarter.

Wholesale inventories in August were boosted by increases in stocks of professional equipment and autos.

Sales at wholesalers increased 0.6 percent, beating economists' expectations.

At August's sales pace it would take 1.17 months to clear shelves. The inventories/sales ratio was unchanged from July.

(This story is refiled to correct reference to timing of government shutdown)

(Reporting by Timothy Ahmann; Editing by James Dalgleish)

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