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 4/16/07 For Feb 2007 | ||||||||||||
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Highlights
Companies appear to be managing economic moderation well, slowing their inventory growth in line with the slowdown in demand. Business inventories rose 0.3 percent in February, just under a 0.4 percent rise in sales and keeping the stock-to-sales ratio unchanged at 1.29.
Retailer inventories are the new data in today's report, showing a 0.3 percent rise that was held down by a sharp drop at auto dealers. But the 0.8 percent retailer gain excluding autos is in line with what have proven to be strong retail sales through the whole first quarter. Factory inventories for February, data previously released, were unchanged for a second month while wholesaler inventories rose 0.5 percent.
There seems little risk, especially following today's strong retail sales report, that economic growth will begin to slow sharply. In fact, should economic growth steady and begin to improve, businesses may very well need to rebuild inventories in what would be a plus for economic growth and employment.
Business inventories moderated in January with a 0.2 percent increase in January but sales fell 0.7 percent, pushing the inventory-to-sales ratio up 2 tenths to 1.30. Soft retail sales in February suggest continued weakness in business sales and a possible blip in inventories for the month.
Business inventories Consensus Forecast for February 07: +0.3 percent
Range: +0.1 to +0.3 percent
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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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