Tuesday, November 22, 2011

GDP Growth Revised Down Due to (Lack of) Inventory Rebuild

Bloomberg details:

The economy in the U.S. expanded less than previously estimated in the third quarter, reflecting a drop in inventories that points to a pickup in growth as 2011 comes to a close.
Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for no revision. Excluding stockpiles, so-called final sales climbed 3.6 percent, the most since last year’s fourth quarter.
As can be seen below, the decline was almost entirely due to the negative impact from inventories (i.e. we consumed what we had previously stored and businesses didn't restock), offset in part by an increase in net exports.

As I mentioned following the most recent trade release:
Trade (imports) is down not because we are consuming goods made in the U.S., but rather because businesses paused on rebuilding inventories.

In other words, it seems we are simply consuming past imports, thus when inventories are rebuilt, the above "should" revert to negative territory unless aggregate demand collapses. Something else to keep an eye.
Source: BEA

1 comment:

  1. The received wisdom today seems to be that somehow drawing down inventories portends a more robust 2012 as businesses restock. That seems to be an argument which posits that business owners are clueless as to future demand and not singing canaries. I think the numbers give ample cause to worry a bit.