Monday, February 2, 2009

The Inventory Story

From IBD:

Inventories unexpectedly rose by $6.2 billion, adding 1.3 percentage points to GDP, after falling in the prior four quarters. Yet that "really is not a positive in an economy where demand is falling rapidly," Dye said.

Slashing stockpiles could be a big negative in early 2009.



In other words, business was not as swift acting as they wanted to be. Instead of cutting back on purchases and creating a leaner inventory picture for themselves they added goods they probably didn't need. That does not bode well for the first quarter numbers that feed into inventory -- numbers like industrial production, durable goods orders and the regional manufacturing surveys.

And that's not all the bad news in the report:

Final sales, which exclude inventories, fell at a 5.1% pace in the fourth quarter amid broad and deep weakness.

Consumer spending on durable goods such as cars and TVs dived at a 22.4% annual rate in the fourth quarter, the biggest drop in more than two decades. Residential investment plummeted 23.6%, and investment in equipment and software dropped at a 28% pace.


There is literally noting to be happy about in the latest GDP report. It shows an economy in deep, deep trouble.