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 11/14/07 For Sep 2007 | ||||||||||||
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Highlights
Business inventories rose 0.4 percent in September, in a gain that's on the high side though still under a 0.6 percent rise for business sales that held the stock-to-sales ratio at 1.27. Inventories at retailers, the new data in this report, rose a mild 0.1 percent but were held down by a 0.1 percent decline at auto dealers who in the prior month had stacked up inventories in case of labor strikes at manufacturers. Excluding auto dealers, business inventories were a little more swollen with a gain of 0.5 percent. Inventories at furniture stores and department stores showed especially steep gains. Inventory data in the wholesale and factory sectors were already released showing bloated gains of 0.8 percent and 0.6 percent.
The rise in September business inventories combined with a 2 tenths upward revision to August business inventories at a 0.3 percent increase is likely to give a further boost to third-quarter GDP. But the inventory gains are likely for the most part to be unintentional and are fallout from recent troubles in the financial-services and housing sectors. The first revision to third quarter GDP will be released at month end.
Business inventories slowed in August, rising only 0.1 percent, following a 0.5 percent boost in July. But the components varied widely. Manufacturer inventories edged down 0.1 percent, wholesaler inventories nudged up 0.1 percent, but retailer inventories, jumped 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. The September numbers will be much more telling for how businesses see the economy moving forward after the credit crunch and turbulence in financial markets over the August and September period.
Business inventories Consensus Forecast for October 07: +0.4 percent
Range: +0.2 to +0.7 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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