What Is Business Inventories?

Business inventories are a statistical metric that tracks the dollar amount of inventories held by retailers, wholesalers, and manufacturers across the nation.

  • Business inventories are an economic figure that tracks the dollar amount of inventories held by retailers, wholesalers, and manufacturers across the nation.
  • The business inventories report is compiled from three sources: the Monthly Retail Trade Survey, the Monthly Wholesale Trade Survey, and the Manufacturers' Shipments, Inventories, and Orders Survey.
  • The inventories-to-sales ratio from the business inventories report released by the Department of Commerce indicates that goods production may slow down or increase in the future.

Reports total U.S. business sales and inventories or Total current-dollar sales and inventories for the economy's manufacturing, wholesale, and retail sectors.

Importance:
Traders look at how retail inventory numbers will influence interest rates. If inventories are rising faster than sales, this usually indicates that the economy is slowing down. A slowing economy means lower interest rates, which is dollar bearish.

It is considered bullish if sales and inventories are rising at the retail, wholesale, and manufacturing levels.

Background:
The Business Inventories Report includes comprehensive sales and inventory statistics from all three stages of the manufacturing processes: manufacturing, wholesale, and retail. By the time the report is released, however, all three of its sales components and two of the inventory components contained therein would have already been reported.

As the retail inventory is effectively the only new piece of information the Business Inventories Report contains, the report causes few ripples in the market. Occasionally, however, retail inventories do swing far enough to affect changes to the aggregate inventory profile, which may affect the GDP outlook. When this does happen, the report has been known to elicit a small market reaction.

In essence, while the market tends to be far more interested in forward-looking statistics, these aggregate sales figures tend to be dated and say little about personal consumption; however, they are still a good coincident indicator.

The information contained in Business Inventories is really far more useful to market economists than it is to other market participants.

Source:
Census Burea, Department of Commerce

Availability:
It is released at 8:30 am EST six weeks after the month ends. For example, data for June is reported in mid-August.