The Impact of the COVID-19 Pandemic on US Business Inventory Levels

Analysis of Total Business Inventories (FRED: BUSINV), January 2015 – December 2024

Problem

Research Question:
What impact did the COVID-19 pandemic have on US business inventory levels between January 2015 and December 2024?

Inventory plays a critical role in business operations. It reflects how organizations balance supply chain risk and customer demand. During the COVID-19 pandemic, businesses may have altered inventory strategies to protect against uncertainty. The goal of this analysis is to determine whether inventory levels changed significantly during the pandemic and whether those changes persisted after the disruption.

Time periods used in the analysis:

  • Pre-COVID: January 2015 – December 2019
  • During COVID: January 2020 – December 2021
  • Post-COVID: January 2022 – December 2024

Data Source

The data used in this analysis came from the Federal Reserve Economic Data (FRED). The dataset used is Total Business Inventories (BUSINV), a monthly, seasonally adjusted series reported in current US dollars. For this project, the data was restricted to January 2015 through December 2024 to establish a stable pre-pandemic baseline and capture both the disruption and recovery periods.

Dataset Contents

The Total Business Inventories dataset measures the total dollar value of inventories held by US businesses, covering manufacturing, wholesale, and retail sectors.

  • Monthly frequency
  • Seasonally adjusted
  • Reported in current (nominal) US dollars
  • Broad coverage across major business sectors

Each observation represents the total inventory value held by US businesses in a given month. An increase indicates that businesses are collectively holding more goods in stock; a decrease indicates inventory drawdown. Because values are nominal, some increases may reflect inflation rather than purely physical quantity changes, but the series still captures meaningful operational decisions related to procurement, production, and supply chain management.

Additional measures used:

  • Year-over-year percentage changes to evaluate growth patterns
  • Smoothed trend estimates (12-month rolling mean) to reduce short-term volatility

Results

Overall Trend Analysis

  • A clear upward trend in total US business inventories begins in 2020.
  • Compared to the pre-COVID period, inventory levels increased during the COVID disruption and remained elevated in the post-COVID period.
U.S. Business Inventories (2015–2024)
Figure 1: US Business Inventories (2015–2024). Gray shading highlights the COVID disruption period (2020–2021). Black line shows nominal values; blue line shows the 12-month rolling mean.

The upward trend during the disruption and recovery periods is visually apparent. While short-term fluctuations remain, the overall trend indicates that inventory levels did not return to the pre-pandemic baseline before 2021.

Period Comparison

Comparing average inventory levels across the defined periods shows that inventory levels rose during the disruption and remained higher even after the disruption subsided.

Average Inventory Levels by Period
Figure 2: Average Inventory Levels by Period (Pre-COVID, COVID Disruption, Post-COVID).
  • COVID vs Pre-COVID: Inventory levels during 2020–2021 were noticeably higher than the 2015–2019 average.
  • Post-COVID vs Pre-COVID: Inventory levels in 2022–2024 remained above the pre-disruption baseline.
  • Persistence of change: The increase observed during the pandemic was not temporary—levels did not revert to the prior baseline.

This suggests businesses adjusted their inventory strategies in response to the disruption, and those adjustments did not fully reverse.

Growth and Volatility

Year-over-year growth was more volatile during the disruption period than during the relatively stable pre-COVID baseline, reflecting rapid operational adjustments in response to supply chain interruptions and demand uncertainty.

Year-over-year change in business inventories
Figure 3: Year-over-year percent change in business inventories. Gray shading highlights the COVID disruption period (2020–2021).

After 2022, growth rates remain volatile and begin to stabilize by mid-2023.

Business Interpretation

  • Increased inventory buffer: Businesses appear to have increased safety stock to reduce exposure to supply chain disruptions.
  • Working capital impact: Higher inventories imply more capital tied up in stock.
  • Structural adjustment in risk management: Persistence suggests organizations may have revised inventory policies to prioritize resilience alongside efficiency.
  • Operational trade-offs: Higher inventory can reduce supply risk but increases holding costs, indicating a shift in the efficiency–resilience balance.

Limitations

  • This analysis is descriptive and does not isolate all factors influencing inventory levels.
  • Other macroeconomic variables (inflation, interest rates, demand changes) also affect inventory behavior.
  • The series is nominal and does not adjust for inflation.

Data: Federal Reserve Economic Data (FRED), Total Business Inventories (BUSINV)

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