Yes, we actually track this. Companies report the balance sheet number; they track inventory levels copiously. We then add up the reported inventories of all n-hundred companies tracked in the index.
And everything is relative in context. That is, some subsets of inventories are cyclical, right? You'd expect tractor part-related inventories to be depleted in September, and then restocked into May when they start selling a lot of tractors again, at least those for farming purposes.
If, with all the proper stats elements adjusted, inventories then rise on a relative and absolute basis, that's likely a bad moon a-risin' for the economy. Less demand than what companies expected; companies will have over-produced stuff to sell. So then they have to cut prices to move things off the shelves, and...it's all just a mess.
So that inventory index number is actually really important for investors and economists trying to figure out if the canary in the mineshaft is dying, or just, um...yawning.
Related or Semi-related Video
Finance: What is inventory?2 Views
Finance allah shmoop What is inventory Well it's Just stuff
you have for sale in one form or another An
auto dealer Well all those cars she has sitting out
there in the sun is a dive bombing targets for
the birds Yeah while their inventory to the car dealership
the cars are inventory the loads of nose hair trimmers
sitting on the shelves at the well appointed nostril fine
store best nostril trimming store in the world Yet their
inventory albeit kind of gross ish inventory especially after use
the four thousand yards of denim cloth sitting in the
weaving factory waiting for thirteen year old girls in thailand
toe weave it all together to make levi's for the
gap Yep that cloth is inventory It isn't finished inventory
It's just a work in process not yet ready for
prime time or a prime thigh or whatever But it's
an asset for the company who owns it and it
is held as inventory on the balance sheet Work in
process right there at the balance sheet right there Okay
And when that inventory is sold and turned into revenues
it'll just become part of the expenses line on the
income statement usually has cost of goods sold or caw
Gse that's What people in the accounting bids say Cocks
thie Inventory is a good but inventory is always good
Of course as many a customer has learned after taking
a hefty shock straight to the hunger And that hurts
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