THE WASHINGTON POST: DECLINING INVENTORIES COULD HELP ECONOMY
The Washington Post’s Neil Irwin gets back to the supply and demand basics, saying that eventually, we will need to put our manufacturers back to work.
The Washington Post Excerpt:
The nation’s shelves are bare. And that could be good news for the economy.
Business inventories have plummeted over the first few months of this year, a major reason that the economy is likely to have shrunk at an extremely fast pace in the first quarter. Analysts believe that the nation’s gross domestic product contracted at an annual rate of about 5 percent.
The sooner businesses finish clearing out inventory, however, the sooner they will need to buy goods to keep up with sales. Companies can only draw down what they have in stock so much before having to place new orders, even if sales are weak. A sharp drawdown could set the stage for somewhat better economic conditions — though probably not a roaring expansion — in the second half of the year.
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