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Taking Inventory

With a light week of data releases on tap and no apparent end to bailouts in sight, now is the time to look at under-the-radar indicators that might shed some light on where the economy is headed. Take inventories, for example. As a recession deepens, stockpiled inventories become a widespread problem since manufacturers have to cut production activity as businesses need less stuff; profitability also takes a hit as companies are forced to slash prices just to get items off shelves.

Although inventory liquidation creates short-term pain, the process in fact represents a necessary condition for production to recover once demand picks back up. Results like those from Wednesday's print on wholesale inventories do offer a hint of optimism; however, like I said last week, this is only one month's worth of data and you need much more information before you can begin to spot those green shoots of an economic rebound.

Posted 04-09-2009 10:59 AM by Brian Lego
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