BUSINESS INVENTORY

Definition

The Business Inventories Report gathers information about US business sales and inventories for the manufacturing, wholesale, and retail sectors of the economy—something that can be an important indicator to the forex trading world. It presents these figures as the total current-dollar sales and inventories.

Importance to FX Trading

Forex brokers and traders will examine retail inventory numbers in order to see how they influence interest rates. Inventory numbers that outpace sales numbers are usually an indicator of a slowing economy, which leads to lower interest rates; this is dollar bearish. Rising sales and inventories at the retail, wholesale, and manufacturing levels is considered dollar bullish.

However, since the only new piece of information included in this report is the retail inventory figures and since the market tends to be more interested in forward-looking statistics, the Business Inventories report usually does not have as substantial an effect on the market or on FX trading as other economic indicators.

Occasionally retail inventories will swing far enough to have an actual effect on the aggregate inventory profile and the GDP outlook, which has been known to cause a small forex trading market reaction.

Individuals involved with forex trading still consider the Business Inventories Report to be a good coincident indicator.