INVENTORY TO SALES RATIO - A RISK INDICATOR TO WATCH

Inventories to Sales Ratio has been rapidly ascending recently above its usual levels of 1.3. It means that Inventories have been actually growing at a higher pace than Sales over the last several months!

Savvy traders would be interested in watching this ratio as a potential risk indicator of the US economy.

If the ratio continues to ascend at the current phase, it will tell us that a significant fall in business sales is happening, and/or a large excess of inventories is being accumulated in the US economy – both factors are signs of a broader economic slowdown.