Using inventories reports for economic clues
By Flickr user Emilio Labrador
The Census Bureau business inventories report, out today, is one of those arcane data sets that are worth understanding because they can help you speak the lingo and generate cogent questions for interviews with corporate executives on your beat.
The monthly report tallies the value of existing wholesale, manufacturing and retail inventories in dollars. The data is collected through surveys of businesses.
Ryan Sweet, senior economist for Moody’s Economy.com in West Chester, Penn., said the business inventory reports are most useful for confirming or adjusting past assumptions about the economy, including the calculation of the national Gross Domestic Product measurement. In other words, the reports aren’t news themselves – they’re a backward-looking, or lagging, indicator – but are tool you can use to understand momentum in the industries you cover.
“During the recession, businesses slashed as quickly as possible,” said Sweet. “They might even have been a little too aggressive. Now, they want to make sure inventories aren’t so lean that they miss out on prospective sales.”
Take a look at Table 3 of the Census Bureau report, which breaks down retail inventories by sector, such as autos and furniture, providing both month-to-month and year-over-year comparatives. You might check in with local establishments about how their inventory planning ahead of spring and summer compares to the national figures, and why. In addition to quizzing retail outlets, check with components makers and suppliers about demand and how they’re responding – increased shifts, hiring, stronger purchasing of parts or ingredients, and so on.
Don’t be misled by seasonal fluctuations, though. If a garden center, pool shop or apparel store starts loading up on summer goods, for example, it’s not necessarily an indicator of economic rebound. These stores are simply doing what they do.
“We put less emphasis on short-term changes,” Sweet said. “With business inventories, it’s the trends that really matter.”
Planning ahead: Here’s a look at major economic releases and other news of interest expect the week of Feb. 15:
Feb. 15: President’s Day. Who benefits from the increased consumerism of a long holiday weekend?
Feb. 15-16: USA Network airs Westminster Kennel Club Dog Show from New York. Contact the Media Center to see if any local dogs are entered. For many of the breeders and handlers, this is a business.
Feb. 16: Mardi Gras. Perhaps a good peg for checking the bar or bistro scene. Or local food & drink traditions related to Fat Tuesday, such as the succulent high-calorie jelly rolls sold by the thousands on this day in Metro Detroit’s Polish enclaves and supermarkets regionwide, as a last hurrah before the privations of Lent.
Feb. 17: Census Bureau New Residential Construction: building permits, housing starts.
Lent begins. Personal finance feature on families giving up credit-card debt, dining out, cable TV, luxury goods or other fiscal favorites?
Feb. 18: Producer Price Index. (Wholesale inflation.)
Feb. 19: Consumer Price Index. (Retail inflation.)
