ABSTRACT
Inventory investment ranks as one of the most volatile components of domestic spending in quarterly data, and, even at an annual frequency, swings in inventories can make important positive or negative contributions to overall gross domestic product growth. In following inventory developments, two major sectors should be considered: manufacturing and trade (further divided into manufacturers, wholesalers, and retailers), and farm. Bureau of Economic Analysis (BEA) uses monthly data on the value of manufacturing and trade inventories collected by the Census Bureau as major sources for estimating manufacturing and trade inventory investment. The technical issue BEA is faced with is making and updating estimates of farm output. At the start of a calendar year BEA incorporates Department of Agriculture forecasts of annual farm output, and assumes that production will be smooth over the course of the coming year; this procedure may result in fairly abrupt changes to reported farm output and inventory figures in the first quarter.
