Posts Tagged ‘inventories’

$6 billion pile-up

14 February 2009

Real GDP kind of did fall 5% last quarter, just as consensus forecasts had it and worse than the official drop of 3.8%.  This story’s a couple weeks old (been busy), but just as the latest unemployment numbers are much worse than they look, the fact that the actual (annualized) drop was “only” 3.8% is actually a sign of weakness, not strength. The NYT and other sources noted that a big reason for the discrepancy was a surprise increase in unsold inventories.

What struck me was the item in the Commerce Department news release that showed that the inventory pile-up actually accounted for all of the discrepancy.  It was 1.3% percent of GDP, i.e., the entire difference between the 3.8% drop in GDP, and the 5.1% drop in “real final sales of domestic product.”