GDP Deja Vu Stunner: Over Half Of US Growth In The Past Year Is From Inventory Accumulation

GDP Deja Vu Stunner: Over Half Of US Growth In The Past Year Is From Inventory Accumulation (ZeroHedge, July 30, 2014):

Back in December 2013, when everyone was expecting a 3% GDP print for Q1, we did a simple analysis concluding that “Inventory Hoarding Accounts For Nearly 60% Of GDP Increase In Past Year.” We stated that this “hollow growth”, which is merely producers pulling demand from the future courtesy of cheap credit and assuming the inventory will be sold off in ordinary course of business without bottom-line slamming liquidations or dumping, and which further assumes a healthy US consumer and global economy, is a flashing red flag for the future of US economic growth. In fact, we were one of the very few who warned that Q1 GDP would be a disaster: “The problem with inventory hoarding, however, is that at some point it will have to be “unhoarded.” Which is why expect many downward revisions to future GDP as this inventory overhang has to be destocked.

This is precisely what happened in Q1, however it was blamed on the “harsh weather.”

Alas, following today’s “spectacular” 4.0% GDP print following the predicted plunge in the US economy in Q1, we can again conclude that not only has nothing changed, but what we warned in Q4 of 2013 is about to happen all over again, and the inventory overhang (which incidentally was estiamted by the BEA and will certainly be revised lower next month) is about to slam future US growth.

The chart below shows the quarterly change in the revised GDP series broken down by Inventory (yellow) and all other non-Inventory components comprising GDP (blue). Something to note: companies are traditionally loath to liquidate inventories unless the economy is clearly in a depressionary collapse as happened in late 2008 early 2009, when inventory dumping was the main reason why GDP remained flat if not negative even as other GDP components rebounded. As such, it is always the last component of GDP to go, and when it does watch out below.

GDP vs Inv Q2

And, as we showed last time, where the scramble to accumulate inventory in hopes that it will be sold, profitably, sooner or later to buyers either domestic or foreign, is most visible, is in the data from the past 4 quarters, or the trailing year starting in Q2 2013 and ending with the just released revised Q2 2014 number. The result is that of the $675 billion rise in nominal GDP in the past year, a whopping 52%, or over half, is due to nothing else but inventory hoarding.

Inv vs GDP LTM

Once again, enjoy the sugar high that inventory accumulation always generates in the current quarter. Just don’t expect it to last.


2 thoughts on “GDP Deja Vu Stunner: Over Half Of US Growth In The Past Year Is From Inventory Accumulation”

  1. Greedy gut corporations……..note all outlets for clothing, furniture, autos, oil changes, gasoline, food of all levels, even brokerage houses……..all are in the hands of the few.

    They are given a heads up long before anything gets to the fool people. They are hoarding in hopes of created shortages that will drive the prices up…..they are down to eating each other, all independent shops are gone. 80% of all new jobs were created by independents ….now they have all the outlets…….but less and less people can afford to shop in them.
    They are so greedy, they don’t get the whole picture……but when 100 million working age people are unemployed out of a total population of 335 million……..don’t bet on getting rich.

    My father and mother were older when I was born, I was a late surprise, both lived through the Great Depression. My mother grew up in great wealth and was horrified to be riding around in Stutz Bearcats with fur rugs while others were living in boxes on Market Street. My grandfather was a politician, need I say more?

    My father grew up in humbler surroundings, his father worked as an interpreter in WWI for the allied forces because he was multi lingual. After the war, he got a job for a bank in San Francisco handling all foreign currencies and exchanges. He rode the train each day from San Mateo…….didn’t own a car most of his life.

    But, it was the fear mentality that came out of the Great Depression that was the most dangerous, and it lasted most of my parent’s life & they did not suffer like many others. But, the poverty on every street was marked and insistent, and many who lived though those years never got over the fear.

    Fear makes people delay shopping & spending as much as possible, and it can last for generations. It was the biggest obstacle to getting free of the Great Depression.
    From that fear can come deflation…….and those greedy guts might end up wishing they had not been so avaricious.
    I have no more sympathy for those who hoard than the wannabe greedy guts who are going to find their backsides slapped down on the pavement. When fear and greed become the only motives, the nation is nearly finished.

  2. Creative Accountancy.

    If ‘growth’ or ‘profitability’ were non existent, one must find another way to look good.

    Re-valuation of stock, capitalisation of miscellany to remove them from revenue losses…whatever….these devious bastards know all the tricks necessary to keep kicking the can down the road until Putin has no option but to retaliate.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.