The latest US business inventories and retail inventories excluding autos for September 2025 reveal key insights for forex traders assessing economic momentum.
Business inventories rose by 0.2%, beating the 0.1% estimate. Retail inventories ex-auto remained flat at 0.0%, in line with the previous month. According to the Census Bureau data:
– Sales totalled $1,947.5 billion in September, unchanged from August (±0.1%), but up 3.7% year-on-year. This indicates steady nominal demand despite slower monthly growth.
– Inventories reached $2,670.0 billion at month-end, up 0.2% month-on-month and 1.2% year-on-year, signalling modest but ongoing inventory accumulation.
– The inventories-to-sales ratio stood at 1.37, down from 1.40 a year ago. This suggests inventories remain relatively lean compared to sales, diminishing the risk of near-term excess stock.
The inventories-to-sales ratio is moving lower but staying steady, which offers no immediate concerns.
In financial markets, US stocks showed mixed movements: the Dow Jones Industrial Average fell by 0.22%, the S&P 500 dipped 0.11%, while the NASDAQ gained 0.13%. Meanwhile, US Treasury yields declined with the two-year down 2.3 basis points, the ten-year dropping 2.1 basis points to 4.160%, and the 30-year easing 1.4 basis points.
Understanding business inventories is vital for forex traders because inventory changes directly affect GDP calculations. GDP accounts for production, not just sales. When production exceeds sales, inventories build up, adding to GDP for that quarter. Conversely, when inventories are drawn down to meet demand, GDP decreases, even if consumer spending remains strong.
For markets and policymakers, inventories can significantly influence quarterly GDP. Inventory rebuilding phases temporarily boost headline growth, while inventory drawdowns can suppress GDP and mask genuine demand strength. This distinction is crucial for evaluating whether growth is driven by final demand or merely supply-chain adjustments and stockpiling.
From a forward-looking perspective, inventory levels affect future production decisions. High inventories relative to sales may prompt companies to reduce output, cut hiring, and limit investment. Conversely, lean inventories generally encourage increased production and restocking, supporting economic growth. Consequently, economists and traders closely monitor inventory growth and the inventories-to-sales ratio to determine whether inventories will act as a tailwind or a headwind for GDP in coming quarters.
Earlier today, the US jobs report was mixed, with October figures rebounding heading into November. Retail sales remained unchanged, but the control group—key for GDP calculations—rose strongly by 0.8% in October.
Original Source: Greg Michalowski of investinglive.com
