Business inventories represent the amount of product available on the market. When compared against sales it can predict productivity. The
inventories/sales ratio was 1.35 at the end of January compared to 1.30 a year ago. As you can see from the chart below, these are 2008 levels. If the sales index goes up again it supports the case that demand in the economy is slowing.
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MANUFACTURING AND TRADE
INVENTORIES AND SALES
January 2015, Source: U.S. Census Bureau
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In January the report said manufacturers’ shipments for January were down 2 percent from December 2014 and 0.3 percent from one year ago. It also said inventories were virtually unchanged from December 2014, but were up 3.4 percent from a year ago.
What Did Today's Business Inventories Release Show
The Business Inventories report for February was released at 10am today and showed an increase in inventories of 0.3 percent, 3.3 percent over last year. As you can see from the chart below the Inventories/Sales Ratio was 1.36, up slightly from 1.35 at the end of January -- the February 2014 ratio was 1.30.
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MANUFACTURING AND TRADE
INVENTORIES AND SALES
February 2015, Source: U.S. Census Bureau
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While business inventories aren't going up at the same speed they were last month, there was still a marginal increase in the level of inventories compared to sales. Either managers are overestimating or consumers aren't buying. Retail numbers were up in March so let's hope inventories got drained as well. The March report is scheduled to be released on May 13, 2015 at 10:00 a.m.
