
Business Inventories
Business inventories is a statistical metric 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 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 is an indicator that goods production may slow down or increase in the future. One of the more interesting data points that comes out of the business inventories report is the inventory-to-sales ratio, which is an indication of the relative size of inventories to the pace of sales.

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What Is Business Inventories?
Business inventories is a statistical metric that tracks the dollar amount of inventories held by retailers, wholesalers, and manufacturers across the nation.



Understanding Business Inventories
Business inventories is a shortened term that refers to the "Manufacturing and Trade Inventories and Sales," a monthly report released by the U.S. Department of Commerce. 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.
- Monthly Retail Trade Survey: Retail merchandise inventories are the value of goods held for sale at the retail level at cost as measured primarily by the FIFO (first in, first out) method of valuation.
- Monthly Wholesale Trade Survey: Inventories at wholesalers, the companies that distribute to retailers, are added to the business inventories numbers each month.
- Manufacturers' Shipments, Inventories, and Orders Survey: At the manufacturing level, stocks of goods, whether in raw material, work-in-process or finished, are valued at cost, again primarily by FIFO.
The sum of the three components is the business inventories figure. The monthly survey has a table that breaks down the three numbers with a sequential comparison to the previous month and a year-over-year comparison (current month versus the same month in the prior year). Also, the report shows "adjusted" figures that take into account seasonality. It often cannot take into account figures in backflush costing scenarios, due to their nature.
Inventories-to-Sales Ratio
One of the more interesting data points that comes out of the business inventories report is the inventory-to-sales ratio, which is an indication of the relative size of inventories to the pace of sales. For example, a ratio of 1.5 would mean that there is enough merchandise in the system to cover one and a half months of aggregate sales.
The trend line should be used in conjunction with a single static figure. If the ratio is rising, it could be an indication that the near-term production of goods will slow down as excess inventories are worked off. On the other hand, if the ratio is falling, it may be a harbinger of increased manufacturing activity in order to restock business inventories and meet demand. Because it is an indicator of trends within the manufacturing sector, some say the ratio is an indicator of recessions.
Related terms:
Backflush Costing
Backflush costing is a product costing approach, used in just-in-time (JIT) operating environments, in which costing is delayed until goods are finished. read more
Barometer
Barometers are data points that represent trends in the market or the general economy. read more
Big-Ticket Item
A big-ticket item is a high-priced item, such as a house or car. In the context of retail stores, they may also refer to products with selling prices and profit margins that are significantly higher than those of other items in the stores. read more
Cash Conversion Cycle (CCC)
Cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert resources into cash flows. read more
The Conference Board (CB)
The Conference Board (CB) is a not-for-profit research organization which distributes vital economic information to its peer-to-peer business members. read more
Depression
An economic depression is a steep and sustained drop in economic activity featuring high unemployment and negative GDP growth. read more
First In, First Out (FIFO)
First-in, first-out (FIFO) is a valuation method in which the assets produced or acquired first are sold, used, or disposed of first. read more
Inventory Management
Inventory management is the process of ordering, storing and using a company's inventory: raw materials, components, and finished products. read more
ISM Non-Manufacturing Index
The ISM non-manufacturing index is based on surveys of more than 400 non-manufacturing (services) firms' purchasing and supply executives in 60 different sectors. read more