Business Inventories

This is a report that entails a breakdown of all business orders that are lying in the manufacturers’ stores, the traders’ stores and in all retail outlets across the country. There are two version of the report - one for manufacturing sector and the other for non-manufacturing sector. Together, these two reports cover close to 90% of the economy. The report is used to establish the amount of backlog of goods and services that are in the stores of traders with a view to finding just how long the goods may stay before being sold.






How important is it?
This report is important in the since that it helps investors and trades as well as manufacturers to tell at what pace the economy is growing. By getting an idea about how much of the produced goods are still stuck in stores across the country, manufacturers may be able to gauge whether to increase production or to reduce it. It is also a clear indicator of the economic growth rate. if the business inventory figures escalate suddenly it could well mean that the economy is headed for a decline. If the same figures reduced drastically over a period, then it is also clear that the economy has started moving towards growth. The two ISM reports reveal the strength of the economy, earnings and a peek into Federal Government's future moves pertaining interest rates.





How is it computed?
The report contains data from a survey of both the manufacturing as well as the non-manufacturing sectors. While the manufacturing sector covers all manufacturing factory goods, the focus of the non-manufacturing ISM report is a 10 components indicator from the service, construction, mining as well as agricultural-based industries, including: supplier deliveries, new orders, prices, backlog of orders, business activity, employment, imports, business inventories, new export orders and inventory sentiments. Incase an investor is interested a more accurate assessment of the forex trend using this report, it would be very advisable for such persons to check the business inventory figures against sales to get an inventories to sales ratio.