Recent Reversal in 20-Year Trend Towards Lower Inventory-to-Sales Ratios by Retailers

The US Census Bureau reports monthly on inventory levels for retail, wholesale and manufacturing sectors. This trend will impact retailers themselves, consumer goods manufacturers, suppliers to those manufacturers and transportation carriers.

The inventory-to-sales ratio in retail has been declining pretty steadily for the last 20 years, with the exception of 2008 when the recession hit full force and retailers were caught with too much inventory relative to quickly declining demand. But most recovered quickly, shedding inventories to put things back on the downward trend line within one year.

The retail inventory-to-sales ratio reached a low sometime during early 2012, but has been slowly increasing since then, mainly due to the fact that interest rates are so low (meaning the cost of holding inventory is less), but also perhaps due to increased optimism on the part of retailers as well.

Source: Supply Chain News