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 8/13/07 For Jun 2007 | ||||||||||||
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Highlights
Business inventories rose 0.4 percent in June in contrast to a 0.3 percent dip for sales, pushing up the stock-to-sales ratio 1 tenth to 1.27. Retail inventories are the new data in the report showing a steep rise of 1.0 percent at auto dealers, the most in a year and a reflection in part at least of slow sales. Rising inventories are a concern especially given data in the ISM reports showing inventory gains in July. Still, firm retail trade data this morning do ease the risk of inventory overhang.
Business inventories rose 0.5 percent in May while business sales jumped 1.3 percent. In turn, the stock-to-sales ratio dropped 1 tenth to a very lean 1.26. It is good news that inventories in general are lean and pose little risk to the economy in terms of an inventory adjustment if consumer spending slows a little. Still, markets should always pay attention to inventory numbers to anticipate any impact on industrial production or imports. More recently, manufacturers' inventories rose a moderate 0.3 percent in June.
Business inventories Consensus Forecast for June 07: +0.4 percent
Range: +0.3 to +0.6 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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