WASHINGTON U.S. business inventories increased a bit more than expected in August even as sales surged, suggesting inventory investment could provide a lift to economic growth in the third quarter.

Business inventories rose 0.4% after edging up 0.1% in July, the Commerce Department said on Tuesday. Economists polled by Reuters had expected inventories to rise 0.3%.

Inventories, a key component of gross domestic product, increased 1.0% on a year-on-year basis in August.

Private inventory investment was neutral to GDP in the second quarter after being a major drag in the first three months of the year. Growth estimates for the third quarter are as high as a 5.1% annualized rate. The economy grew at a 2.1% pace in the April-June quarter.

Businesses are carefully managing inventory amid expectations of weaker demand because of higher interest rates.

Retail inventories increased 1.0% in August, instead of 1.1% as estimated in an advance report published last month. They advanced 0.5% in July.

Motor vehicle inventories accelerated 2.1%, rather than 2.3% as estimated last month. They increased 1.7% in July. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.5% instead of 0.6% as previously reported. They were unchanged in July.

Wholesale inventories slipped 0.1%, while stocks at manufacturers rose 0.3%.

Business sales shot up 1.3% in August after gaining 0.8% in July. At August's sales pace, it would take 1.37 months for businesses to clear shelves, down from 1.39 months in July.

(Reporting by Lucia Mutikani; Editing by Paul Simao)