The Vanishing Inventory Bounce

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"The Vanishing Inventory Bounce"

Gavyn Davies explains that economic conditions are in many ways even worse than they appear since growth in recent quarters has been driven by firms rebuilding their inventories rather than by growth in final sales:

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Inventory effects produce sporadic episodes of exaggeratedly low growth followed by unsustainable bounces. We’re now ending a bounce cycle, and we’re not seeing the underlying sources of demand growth step up to the plate. What’s more, “inventories have started to rise more rapidly than companies may be intending” so we may go back into an inventory downswing cycle.

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