Business inventories are “waiting roomâ€‌ goods – products that have been manufactured, processed, or mined by have not yet been sold to the final user. As such, they are a key component of the GDP calculation. GDP is the total amount of final goods and services produced in an economy in a given period. That includes goods that haven’t been acquired by a final purchaser, otherwise known as inventory.

However, inventories’ role in the GDP calculation is not the sole reason economists monitor them carefully.

Failure to balance inventories against demand can, and has, hurt businesses and destabilized the economy. Companies that overstock their shelves in anticipation of orders that do not materialize find themselves in a hole, forced to cut production and lay off workers. It has been hypothesized by prominent economists that the Great Crash of 1929 was provoked in part by the misalignment of inventory positions. On the other hand, businesses whose inventories are too lean miss potential profit during a boom.

The MTIS report compiles sales data previously reported in the Census Bureau’s Advance Monthly Sales for Retail Trade and Food Services report together with inventory and sales information from its Wholesale Trade Survey and its Manufacturers’ Shipments, Inventories, and Orders survey.

Low inventory positions may signal an impending acceleration in production and manufacturing activity, while high inventories may portend a recession and widespread layoffs.

The American Dream of home ownership is one of the primary drivers of the US economy. Housing activity affects the investment (I) component of the aggregate expenditure formula for calculating gross domestic product: C+I+G+(X-M). The construction of new, privately owned residential structures, particularly single-family homes, is very telling regarding consumer sentiment and the health of the economy.

While new housing only accounts for 3 percent of GDP it can have a profound effect on the economy due to the multiplier effect of related spending and other indirect contributions. Once a home is bought, it must be furnished and decorated.

All of this activity means new jobs for construction workers, retail salespeople, and manufacturers; increased tax revenues for local and state municipalities; and greater spending on goods such as carpeting, furniture, and appliances.

There are several important housing indicators, including the Census Bureau’s new home sales and the National Association of Realtors’ existing home sales. The most influential, however, is new-housing starts and building permits. These numbers are contained in New Residential Construction, which is released jointly by the U.S. Department of Commerce’s Census Bureau and the U.S. Department of Housing and Urban Development at 8:30am ET on approximately the fifteenth day of the month following the reference month.