me: >> Bivens is right on at least one point: a slowdown of the pile-up of >> inventories is often a sign of future growth of production, since >> businesses have to increase their orders to replenish the inventories.
Shane: > "Often" doesn't mean always, obviously! > especially when inventories are still rising. Of course, the growth rate of inventories is slowing. The rise of inventories can be a problem if they're growing faster than the current demand for products. (They may not be a problem if businesses boost inventories in anticipation of future growth of demand.) If they're growing more slowly than current demand, on the other hand, it can cause a later boom in production as businesses replenish their inventories. In this light, a key number is the inventory-sales ratio (available from the St. Louis Fed at http://research.stlouisfed.org/fred2/series/ISRATIO/downloaddata). In recent months, it's been at about the same level as the trend. Usually, inventory-driven cycles are due to reversion to the trend. This suggests that there won't be much of an inventory-driven growth of production (due to replenishment of inventories) or much of an inventory-driven fall in production (due to excess production). On the other hand, in the earlier part of 2012, the inventory/sales ratio was below the trend line. The return to trend at the end of 2012 suggests that we've already enjoyed a boost to demand due to replenishment, so that (at least for a few months), it won't be inventories that drive the economy's fluctuations. > It is not "often" that consumer buying power, in already depressed condition > (supported mainly by replacement demand for autos and recovery spending from > a major storm), is hit by a sudden two percent impact from a payroll tax > increase as has just happened at the start of Quarter One. < The stats that Bivens is talking about are for the 4th quarter of 2012, no? It's possible that many working people wanted to cut consumer spending _in anticipation of_ 2013's payroll tax hike, but since so many are living paycheck to paycheck, that's quite difficult. Now, it's quite possible that fiscal austerity and the other things that Shane mentions will lead to a "second dip." Also, the slowdown of GDP growth may have an accelerator effect, causing private fixed investment to fall. On the other hand, I think the gross inadequacy of the so-called recovery is a more important issue than the possibility of a second dip. There's been a bit too much wolf-crying about the second dip. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
