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 6/12/08 For Apr 2008 | ||||||||||||
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Highlights
April's business inventory data look positive, showing a better than expected 0.5 percent gain at a time that demand appears to be gaining steam. Retailer inventories rose 0.4 percent in April, nearly reversing a 0.6 decline in March. Retailer inventories may have to climb further given strong retail sales in both April and also, in data released earlier this morning, in May. Excluding autos, retailer inventories rose 0.7 percent and are up a year-on-year 2.3 percent that is safely below the 2.8 percent rate for sales. Inventories at auto dealers fell 0.3 percent following a 0.8 percent decline in March, reflecting strike-related cuts in production as well as weak sales.
Components previously released are factory inventories which were unchanged and wholesaler inventories which rose 1.3 percent. Business inventories are lean and inventory building in anticipation of rising demand may prove a welcome plus for jobs and for economic growth.
Business inventories are being kept under control by businesses as economic growth slows. Business inventories rose only 0.1 percent in March, primarily pulled lower by a 0.5 percent drawdown at retailers. More recently, retail sales have been mixed with April sales moderately strong but May auto sales slipped. Newer inventory numbers include a flat reading for manufacturers' inventories in April and a 1.3 percent jump in wholesale inventories for the same month. Odds are that retail inventories will be a little on the high side - especially for motor vehicles - and will boost overall inventory stocks for the month.
Business inventories Consensus Forecast for April 08: +0.3 percent
Range: +0.1 to +0.5 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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