The inventory spike is huge, but it is tapering off - that's generally a good thing that means production will start up again to maintain supply. Is the recovery around the corner?
Looking at the chart I notice one thing: Could it be that the steady long-term decrease in the ratio is over now? Could that mean that productivity growth for US companies will be lower in the next years?
The downward trend is a reflection of better inventory management by firms.
The big spike recently reflects inventory pileup from the recession kicking spending in the balls.
The reduction back to low levels doesn't necessarily mean consumer spending is up; it could just mean that firms stopped buying new inventory until their backlog cleared out.
This doesn't mean there's going to be anything like recovery happening soon. Sales could drop to next to nothing and the chart wouldn't move much because new inventory purchases are so low following the spike.
5 comments:
I do not understand basic economics. What does this chart show?
What does Goldman-Sachs do that is productive for the U.S. economy?
The inventory spike is huge, but it is tapering off - that's generally a good thing that means production will start up again to maintain supply. Is the recovery around the corner?
Looking at the chart I notice one thing: Could it be that the steady long-term decrease in the ratio is over now? Could that mean that productivity growth for US companies will be lower in the next years?
The downward trend is a reflection of better inventory management by firms.
The big spike recently reflects inventory pileup from the recession kicking spending in the balls.
The reduction back to low levels doesn't necessarily mean consumer spending is up; it could just mean that firms stopped buying new inventory until their backlog cleared out.
This doesn't mean there's going to be anything like recovery happening soon. Sales could drop to next to nothing and the chart wouldn't move much because new inventory purchases are so low following the spike.
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