A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.



Interview Part 3, Reality of Inventory Build

Key points from Bloomberg TV interview:

Fed’s Fisher says "perhaps eventually" with regard to productivity growth rising. This notion was discussed in an ECRI piece titled Simple Math last June.

Since then, the Growth rate in ECRI’s U.S. Leading Index of Consumer Spending (USLICS) has been slowing, suggesting underwhelming retail sales this holiday season.

On top of that, there’s been a huge inventory build, with the inventory-to-sales ratio surging to its highest reading since the Great Recession. One might suppose that businesses are intentionally building inventory to meet a surge in expected demand, but a key point is that while inventories have risen steadily for years, the dollar value of sales has actually been falling since the summer of 2014.

This tells you that the inventory build is not by design, and is the main reason for the even more promotional holiday season we’re all seeing this year. Furthermore, the huge inventory overhang will necessarily act as a drag on growth, compounded by weaker business investment than hoped for by many, including the Fed.


Related News & Events

Interview Part 1, Cyclical Slowdown

Bloomberg December 8, 2015

How to discern noise from cyclical direction. More


Interview Part 2, Oversupply Overwhelming Demand

Bloomberg December 8, 2015

Post-GFC stimulus has resulted in massive oversupply. More


Macroeconomic Sightings

Grant's December 2, 2015

The U.S. slowdown has lasted all year. How much worse it will get is the $64,000 question. More


Related Reports