Business Inventories & Supply Chain Data: Economic Signals

Why Inventories Matter

Business inventories are a critical economic indicator:

• Inventory investment is a volatile GDP component
• Inventory cycles can amplify recessions
• Supply chain health signals future production

Key Inventory Series

Total Business Inventories

Source: Census Bureau

FRED Series: BUSINV | IQ Score: 94

• Monthly release (6 weeks after month-end)
• Covers manufacturing, wholesale, retail

Inventory-to-Sales Ratio

FRED Series: ISRATIO | IQ Score: 95

• Inventories divided by monthly sales
• Key recession indicator
• Normal range: 1.25-1.45

Manufacturing Inventories

FRED Series: AMTMNO | IQ Score: 94

• Factory inventory levels
• New orders vs inventory growth signals demand

The Inventory Cycle

Phase 1: Buildup

• Sales growing → businesses stock up
• GDP boost from inventory investment
• Often early recovery phase

Phase 2: Excess

• Inventory-to-sales ratio rises
• Sales slow but inventory still growing
• Warning sign of coming cutbacks

Phase 3: Liquidation

• Businesses cut orders
• Production falls faster than sales
• Deepens recessions (2008, 2020)

Phase 4: Restocking

• Depleted inventories need rebuilding
• Manufacturing ramps up
• GDP accelerator effect

Supply Chain Indicators

ISM Supplier Deliveries

FRED Series: MANE | IQ Score: 93

• Above 50 = slower deliveries (supply strain)
• Below 50 = faster deliveries (slack)
• 2021 peak: 75+ (severe disruptions)

Logistics Managers' Index

• Inventory levels
• Warehousing capacity
• Transportation capacity
• Available online (not FRED)

Container Shipping Rates

• Freightos Baltic Index (FBX)
• Shanghai Containerized Freight Index
• Signals global trade health

Auto Inventories (Key Example)

Days' Supply

Industry-specific inventory measure

• Normal: 60-70 days
• 2021 chip shortage: 25-30 days
• Impacts production and pricing

Vehicle Inventory Sources

• Ward's Automotive
• Motor Intelligence
• OEM investor presentations

Retail Inventory Signals

Retail Inventory-to-Sales

FRED Series: RETAILIRSA | IQ Score: 93

• Lower = healthy demand
• Higher = potential markdowns coming
• Sector breakdown available

Big Box Warning Signs

Watch for:

• Rising wholesale inventories + slowing sales
• Margin compression warnings
• Promotional activity increases

Using Inventory Data

Recession Warning

Inventory-to-sales ratio rising + slowing orders = recession risk

Sequence typically:

• Orders slow

• Inventories build

• Production cut

• Layoffs follow

Recovery Signal

Inventory-to-sales ratio falling + stable sales = restocking ahead

Sector Rotation

• Excess inventory in one sector = avoid
• Depleted inventory = possible production boost

GDP Implications

Inventory Investment Volatility

Inventory investment can swing GDP by 1-2 percentage points quarter-to-quarter.

Example (Q1 2022):

• GDP growth: -1.6%
• Inventory drag: -0.4 points
• Without inventory: -1.2%

Inventory Cycle Timing

• Inventory builds add to GDP
• Inventory liquidation subtracts from GDP
• Can extend or shorten recessions

Track all inventory and supply chain data on DataSetIQ with our quality scoring.