WASHINGTON, Aug 15 (Reuters) - U.S. business inventories

increased moderately in June as a surge in stocks at retailers

was offset by mild gains at wholesalers.

Inventories rose 0.3% after increasing 0.5% in May, the

Commerce Department's Census Bureau said on Thursday. The

increase in inventories, a key component of gross domestic

product, was in line with economists' expectations.

Inventories increased 2.1% year-on-year in June. Private

inventory investment contributed 0.82 percentage point to the

economy's 2.8% annualized growth pace in the second quarter,

after being a drag for two straight quarters.

Retail inventories shot up 0.9% in June instead of 0.7% as

estimated in an advance report published last month. They rose

0.8% in May. Motor vehicle inventories climbed 2.2% instead of

1.8% as previously reported. They advanced 2.4% in May.

Retail inventories excluding autos, which go into the

calculation of GDP, rose 0.2% as reported last month. They

gained 0.1% in May. Wholesale inventories increased 0.2% in

June, while stocks at manufacturers were unchanged.

Business sales fell 0.1% in June after being unchanged in

May. At June's sales pace, it would take 1.38 months for

businesses to clear shelves, unchanged from in May.