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Economic Calendar |  Index of Calendar Terms

Economic Calendar Terms

Business Inventories

The business inventories report includes sales and inventory statistics from all three stages of the manufacturing process (manufacturing, wholesale, and retail). But by the time it is released all three of its sales components and two of its inventory components have already been reported. Because retail inventory is the only new piece of information it contains, the market usually ignores the business inventories report.

However, sometimes retail inventories swing enough to change the aggregate inventory profile. This may affect the GDP outlook. When it does, the report can elicit a small market reaction.

The aggregate sales figures are dated and they say little about personal consumption. They are actually a good coincident indicator, but the market is far more interested in forward-looking statistics.

The inventory-to-sales (I/S) ratio measures the number of months it would take to deplete existing inventory at current sales rates. A relatively low (high) I/S ratio may mean that manufacturers will have to build up (draw down) inventory levels. Depending on the strength of final demand and the degree to which recent inventory changes have been intended or unintended, this can have an effect on the industrial production outlook. Note that this information is much more useful to market economists than it is to other market participants.

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