WASHINGTON, Nov 25 (Reuters) - U.S. business inventories

were unexpectedly unchanged in August, with stocks at retailers

falling amid strong sales.

The unchanged reading in inventories reported by the

Commerce Department's Census Bureau on Tuesday followed a 0.1%

gain in July. Inventories are a key component of gross domestic

product and one of the most volatile. They increased 1.1%

year-on-year in August. The report was delayed by the recently

ended 43-day shutdown of the government.

Business inventories decreased at a $18.3 billion annualized

rate in the second quarter, subtracting 3.29 percentage points

from GDP. That was, however, more than offset by a record 4.83

percentage point contribution from a smaller trade deficit.

The Atlanta Federal Reserve is forecasting gross domestic

product grew at a 4.2% annualized rate in the third quarter.

The government will release the third-quarter GDP estimate

on December 23. The economy grew at a 3.8% pace in the

April-June quarter.

Retail inventories fell 0.1% in August, instead of being

unchanged as estimated in an advance report published in

September. They rose 0.1% in July.

Motor vehicle inventories fell 0.5%, rather than declining

0.4% as previously reported. They rose 0.2% in July.

Retail inventories excluding autos, which go into the

calculation of GDP, were unchanged. They were previously

reported to have increased 0.3%.

Wholesale inventories were flat in August as were stocks at

manufacturers.

Business sales rose 0.2% in August after increasing 1.0% in

July. Sales at retailers advanced 0.5%. At August's sales pace,

it would take 1.37 months for businesses to clear shelves,

unchanged from July.

(Reporting by Lucia Mutikani)