WASHINGTON (Reuters) - U.S. business inventories fell in March, but this could lay the ground for businesses to rebuild stocks and support economic growth in the second quarter.

Inventories dipped 0.1% after increasing 0.3% in February, the Commerce Department's Census Bureau said on Wednesday. The drop in inventories, a key component of gross domestic product, was in line with economists' expectations.

Inventories increased 0.7% year-on-year in March.

Private inventory investment cut 0.35 percentage point from GDP growth in the first quarter, the government reported last month. It was the second straight quarter that inventories subtracted from GDP.

The economy grew at a 1.6% annualized rate in the January-March quarter, the slowest pace in nearly two years.

Retail inventories rose 0.2% in March, instead of 0.3% as estimated in an advance report published last month. They increased 0.3% in February.

Motor vehicle inventories accelerated 1.1% as previously estimated. They rose 0.8% in February.

Retail inventories excluding autos, which go into the calculation of GDP, fell 0.2% instead of 0.1% as reported last month. They gained 0.1% in February.

Wholesale inventories dropped 0.4% in March, while stocks at manufacturers gained 0.1%.

Business sales slipped 0.1% in March after increasing 1.4% in February. At March's sales pace, it would take 1.37 months for businesses to clear shelves, unchanged from February.