Inventories in U.S. Rise at Fastest Pace in Two Years

[impik]

Inventories at U.S. businesses rose in July at the fastest pace in two years as companies stocked up ahead of a back-to-school sales season that proved to be better than projected.

The 1 percent increase in the value of stockpiles was the biggest since July 2008 and followed a revised 0.5 percent rise in June, the Commerce Department said today in Washington. Sales climbed 0.7 percent after decreasing 0.5 percent.

Companies had enough goods on hand to supply 1.26 month’s worth of sales at July’s pace, the same as in the prior month. The need to restock depleted inventories, a major driver of the economic recovery, will probably diminish, keeping stockpiles more in line with demand.

“Businesses remain cautious, but they are not retrenching,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The inventory contribution may be fading more slowly, a positive for near-term growth.”



http://www.bloomberg.com/news/2010-09-14/business-inventories-in-u-s-increase-more-than-forecast-as-sales-climb.html

[WI_DEM]

1. The economic news these last couple of weeks has been pretty positive on a variety of fronts

I hope it keeps up. It won't be enough to help us much this year, but it can't hurt if things continue it could dim the GOP tide some.

[Hawkowl]

2. Increasing inventories not so positive

Inventory does count positively in calculating GDP. However, when inventory continues to build, this means that producers expectations have exceeded actual consumer's demand. In other words, they aren't selling as much as they thought they would. So an excessive inventory build up could exacerbate a slowdown.

It is almost like our current depression has three components. The business cycle recession that seems to keep replaying itself; an overall structural depression which is represented by loss of whole industries and manufacturing; combined with a perverse liquidity trap that is the result of the insolvent zombie financial institutions left in Wall Streets great robbery.