What Do Inventories Tell about the Future Economy?
Abstract
ABSTRACT This paper provides evidence that the mean and dispersion of manufacturers’ inventory growth, as reflected in accounting disclosures, convey valuable information about subsequent changes in economic output growth. At the same time, I find that although government statistical agencies and professional forecasters incorporate mean inventory growth in their estimates or forecasts, they fail to account for its dispersion. I develop and calibrate a heterogeneous-firm model to show that the leading information embedded in macro-level inventory moments arises from firms’ asymmetric responses to news shocks at the micro level. The model also suggests that the failure to incorporate dispersion is likely due to the noise in the dispersion signal used by statistical agencies and forecasters. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: E01; E22; E32; E37; M41.
Fields of Study & Subjects
Market Dynamics and Volatility
Monetary Policy and Economic Impact
Energy
Environment
Economic Growth
Publication details
- Journal / source
- The Accounting Review
- Publisher
- American Accounting Association
- Pages
- 1–31
- Publication date
- 1 September 2026
- Language
- EN