Inventories: a cross-country comparison of behaviour and methodology

Highlights relationships within component inventories data,between GDP and inventories and the relative importance of individual sectors' holdingsThere are a number of contrasting economic theories regarding companies’ motivations for holding inventories. One theory suggests firms use inventories to smooth production levels over time in response to demand; another suggests firms have an optimal range of inventory levels which they will maintain by varying production levels. The purpose of this article is not to solve this debate but instead to highlight the relationships within component inventories data, the relationships between gross domestic product and inventories and the relative importance of individual sectors’ holdings within the series as a whole. Subsequently, a comparison of official data and external survey data within the UK will be discussed. In addition, the article aims to highlight the difficulty in measuring inventory data and discusses issues surrounding methodology. Economic & Labour Market Review (2008) 2, 25–31; doi:10.1057/elmr.2008.120