Business Activity Recession Indicators
Business-side indicators track what firms are doing, not what households feel. Corporate profits, NFIB optimism, and the inventory-to-sales ratio each capture the supply side of the cycle that precedes layoffs and consumer retrenchment.
Why this category matters
Firms cut capex and hiring before households cut spending. Watching the supply side gives you a 3-6 month head start on the demand-side data everyone else is watching.
How to read it
Corporate profits YoY below zero for two consecutive quarters is the single cleanest business-side recession tell in the post-WWII era.
Historical lead time
Business-side indicators lead recessions by 2-8 months. SLOOS tightening above 40% of banks leads by 6-9 months.
Indicators in this category
Frequently asked questions
What does the inventory-to-sales ratio signal?
A rising inventory-to-sales ratio means firms are carrying more stock relative to demand. Sustained increases signal slowing final demand and often precede production cuts and layoffs.