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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 10/12/07 For Aug 2007 | ||||||||||||
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Highlights
Businesses slowed inventory accumulation in August on the risk that economic growth would be slowing. Business inventories rose only 0.1 percent in August vs. a 0.5 percent rise in July. Data components show manufacturer inventories down 0.1 percent, wholesaler inventories up 0.1 percent, and retailer inventories, the new component in today's data, up 0.5 percent. But the gain in retail is centered in dealer inventories which rose 1.5 percent in August, a month when the industry was preparing for a strike at GM. Excluding autos, retailer inventories were flat in the month.
Inventories did slow in August but still not enough to keep in line with an actual contraction in sales as business sales fell 0.4 percent to move the sales-to-stock ratio one tenth higher to 1.27. But the risk of inventory overhang is slim given the success of businesses, seen as recently as the first quarter, to trim back inventories quickly. Today's mostly strong retail sales data together with September's strong jobs report point instead to economic strength ahead and the possible need to refill inventories.
Business inventories rose 0.5 percent in July, well below a 1.1 percent rise in business sales to push the stock-to-sales ratio down to 1.26 from 1.27. During times of slowing economic growth, it is critical that inventories not swell - otherwise, slow growth could turn into recession. That does not appear to be the case for now, but inventories numbers still bear watching. More recently, the factory component of inventories slipped 0.1 percent in August, indicating that overall inventories are likely to be soft for the month.
Business inventories Consensus Forecast for August 07: +0.2 percent
Range: +0.1 to +0.4 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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