Enterprises’ Inventory Fluctuations Useful in Monitoring the Economic Cycle

ZHANG Tao , AN Li  and CHEN Hao

Financial Survey and Statistics Department, People’s Bank of China

Abstract:

It has been demonstrated by both domestic and international theories and empirical studies that inventory fluctuations are cyclical in nature, which makes it useful in monitoring how the economy is currently operating. Based on a survey of over 5,000 enterprises conducted by the People’s Bank of China, we have attempted to compile a finished goods inventory index of the 5,000 enterprises. Through our analysis, we are able to determine that the 5,000 enterprises inventory index displays the basic features of pro-cyclicality and fits the business cycle with a lag of one quarter. Currently, the inventory index shows signs of declining after five consecutive months of increases, indicating that the expansion of enterprises’ production is temporarily slowing down.

Key Word:

5,000 enterprises, inventory index, business cycle, pro-cyclicality

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