The rising business inventory-to-sales ratio is not a signal of an imminent recession. The increase in the ratio of some specific components – machinery – is a potential problem. But much of the rise in recent years is instead due to a compositional shift, as autos become more important and petroleum becomes less important. Beyond that, the upward trend could well be because the earlier improvements in supply chain management have been exhausted and the more recent shift to non-store retailing makes holding inventories less costly.
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