Description:
Business inventories reflect the monthly percentage change in inventory levels from manufacturers, wholesalers, and retailers.

Released: 6 weeks after end of the month by the Commerce Department

Calculation:
Inventory/sales (I/S) ratio = level of inventory / monthly sales. This figure basically reflects how long it will take a firm to sell of its current level of inventory based up on last month’s sales. Generally speaking, the mean (I/S) ratio is around 1.5 for most industries.

Key Point:
Business Inventories play an important role in the US economy. A company needs a certain level of inventory just to maintain a business and make money; but with inventories too high a company can quickly find itself in financial turmoil. Changes in inventories can be keys to seeing which way the economic environment is headed. If sales start to drop inventories will build and therefore wholesalers will begin to order less; this will put a strain on factories, which will be forced to cut back production. On the other hand large business inventory reserves can help bring economies out of recession by having larger discounts and sales to try to reduce inventories, which will spur more economic activity.

Release site: Click here