Inventory vs. Business cycles

[FrankCFA]

When business cycles slow down, will inventory to sales ratio usually rise or down? (Both numerator and denominator lower….)

 

[patso]

Inventory accumulates (UP) and sales slows (Down).

 

[FrankCFA]

patso wrote:
Inventory accumulates (UP) and sales slows (Down).

Declining confidence so inventory is falling?

 

[S2000magician]

Inventories generally lag sales.
When the business cycle slows, sales slow, but inventories are still high. They don’t drop till later.
When the business cycle picks up, sales increase, but inventories are still low; they don’t rise till later.

 

[FrankCFA]

Thanks! Given business cycle is thought to be 9 to 11 years (according to CFA), can we say at the beginning of slowdown inventorry will start to accumulate because it lags sales. But, start to decline after inventory correction?

 

[S2000magician]

Yup.