Slide in shipments drives up the inventory-to-shipment ratio

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The inventory-to-shipment ratio jumped to 1.50 in August from July’s recent low (1.45).

The steep drop in manufacturing shipments was responsible for the sizable gain in the ratio. August’s level matches that of last May, and is the highest since December 2001 (1.55), a time of stubbornly high inventories relative to weak demand.

The finished-product inventory-to-shipment ratio is a measure of the time that would be required in order to exhaust finished-products if shipments were to remain at their current level.

The inventory-to-shipment ratio has been inching upwards over the last year. In August 2002, the ratio stood at 1.42.

The finished-product inventory-to-shipment ratio edged up in August to 0.47 from July’s 0.46. August’s significant decline in finished-product inventories was outpaced by the 4.5% drop in shipments, contributing to the rise in the ratio. The ratio has been on an upward trend since mid-2002.

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