Sales Declining Faster Than Inventory

Although businesses are trimming inventory levels, actual sales are declining at a faster pace. The result is a spike higher in the inventory to sales ratio.

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Source: Federal Reserve Bank of St. Louis

One reason for the decline in sales is due to consumers reducing their debt exposure. The consumers' desire to reduce debt is attributable to concern about the future direction of the economy and, for some, the inability to gain access to credit. In the short run, the reduced spending/higher savings is a drag on economic activity, but reducing debt levels is beneficial in the longer term.

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Source: Federal Reserve Bank of St. Louis