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2008 Economic Calendar |
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Resource Center » U.S. & Intl Recaps | Release Dates | Why Investors Care | Today's Calendar
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Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. Why Investors Care
| Released on 3/13/07 For Jan 2007 | ||||||||||||
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Highlights
Business inventories kept going higher, up 0.2 percent in January though sales were going lower, down 0.7 percent and pushing the inventory-to-sales ratio up 2 tenths to 1.30. This morning's soft retail trade data, along with the possibility of soft manufacturing data to follow, raise the risk that inventories backed up in February as well. In January, retailer inventories rose 0.2 percent while manufacturer inventories fell 0.2 percent. But wholesaler inventories, at the base of the supply chain, jumped 0.7 percent. Unwanted inventories at the wholesale level could slow the wider drawdown in inventories. The speed at which purchasers react to the slowdown will be an important factor in whether the slowdown remains moderate or, because of inventory overhang and subsequent cutback in production, becomes more severe.
Business inventories were unchanged in December while business sales rose 1.4 percent, driving the stock-to-sales ratio down 2 tenths to 1.28. More recently, manufacturers' inventories in January fell 0.2 percent while wholesale inventories jumped 0.7 percent. Both manufacturers' and wholesale inventories for motor vehicles jumped in January. Markets should be watching the retailer equivalent in overall business inventories to see whether manufacturers will need to pare back on motor vehicle production or not. More recent sales data indicate that sales have been steady at respectable levels.
Business inventories Consensus Forecast for January 07: +0.1 percent
Range: -0.1 to +0.3 percent
![[Chart]](chart.gif)
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Inventories tend to rise when economic conditions are strong; since sales are rising at the same time, the inventory-to-sales ratio may remain stable, or rise at a very slow pace. Inventories tend to drop when economic conditions are weak; since sales are falling at the same time, the inventory-to-sales ratio may remain relatively stable. The I-S ratio then begins to rise as sales fall more quickly than inventory growth. |
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