While U.S. inventory levels remain low, there is a slight indication of an increase in the U.S. business inventory-to-sales ratio, due to higher sales (The Wall Street Journal, December 15, 2010). The accompanying table shows a portion of seasonally adjusted inventory to-sales ratios from January 2008 to October 2010; the full data set can be found on the text website, labeled Inventory-to-Sales.
a. Plot the above series. Which polynomial trend model do you think is most appropriate?
b. Verify your answer by formally comparing the linear, quadratic, and cubic trend models.
c. Make a forecast for the inventory-to-sales ratio for November and December of 2010.