"History is a wonderful thing, if only it was true"

Thursday, April 29, 2010

Inventories count

All relates to inventory cycles or behavior, and how inventories either drive the economy or amplify the moves.

In this case, it's not just steel or related, but all businesses.

Key to Recovery: Restocking All Those Shelves - BusinessWeek

What indicator is former Federal Reserve Chairman Alan Greenspan following most closely these days? No, it's not consumption, business investment, or even the jobs market. It's inventories. "That's a peculiar thing to say," the 84-year-old economist admitted in a Bloomberg Television interview on Mar. 26. But "inventories are critical now."

Companies slashed stockpiles by a record amount last year as demand for their products nosedived. That aggressive de-stocking aggravated the downturn and helped make the decline the deepest since the 1930s. In fact, corporate shedding of inventories accounted for almost a third of the 2.4% contraction in the American economy last year.

Now, with the economy showing signs of recovering and sales picking up, the reverse dynamic is about to set in.

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