Unsold goods held by manufacturers, wholesalers and retailers. Business Inventories are often able to show economic turning points. A significant decrease in inventories implies that the economy is on the verge of rapid growth because stockrooms for businesses are empty and need to be replenished, which triggers higher production overall.
Inventories are also useful when examined in conjunction with total business sales. Rising inventories paired with slackening business sales are indicative of troubled economic times. When business sales slow, retailers’ inventories increase and they are forced cut back on wholesale orders. Wholesalers, affected by the fear of swelling inventories, will slow or even shut down production in factories.
Recent technological advancements allow firms to manage inventories more efficiently, keeping inventory levels lower. Accordingly, declines in inventory stores are often indicative of productivity increases rather than changes in demand. But these logistical advances put particular emphasis on growing inventories. Increases in stocks of goods signal declining demand in America .
While the Business Inventories figure is released with the Advanced Retail Sales report, the Advanced Retail Sales report features a lag time of merely two weeks. The Business Inventories’ lag time is three times as long, making it an indicator that follows rather than leads the overall pace of the economy. Market participants tend to focus more on the Advanced Retail Sales figures.
The headline number is expressed as a percentage change from the previous month.
Relevance: Rarely affects markets
Release schedule : 8:30 AM (EST); monthly, midmonth and six weeks after the reported month
Review schedule: Spring or summer, small revisions cover several years span
Source of report : U.S. Census Bureau
Web Address : www.census.gov
Address of release : http://www.census.gov/mtis/www/mtis.html
AKA : Manufacturing and Trade Inventories and Sales
- Learn More About How Economics Move Markets