View From a Height
Commentary from the Mile High City
Monday, February 09, 2004

Business Inventories 

In more good news, business inventories were up in December. The key numbers:

  • Wholesale inventories up 0.6%, wholesale sales up 1.0%
  • Durable goods inventories up 0.9%, sales up 1.4%
  • Year-over-year wholesale inventories up 2.0%, wholesale sales up 8.0%
  • Turnover ratio (how long current inventories would last, in months) stayed about steady at 1.17, from 1.18

    One of the more misunderstood economic indicators is business inventories. Inventories rise and fall, but the proper interpretation of that number is completely context-dependent. Increasing inventories are good, if they're in response to increasing orders, and represent increasing orders of their own. They're bad if business orders are flat, and warehouses are filling up with unbought product. In this case, the represent rising confidence, so they're good.

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