Inventories Point to Worse Economic Forecast

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By Bill Conerly,
Businomics, Conerly Consulting LLC

I’ve lowered my economic forecast for 2009 based on inventory data which I’ve recently studied.  Here’s the long-run picture:


That trendline (in red) would head even lower if it were calculated without the latest data.  It looks to me like we’ll have a $200+ billion inventory correction this year, as companies try to get their inventory-sales ratios back to normal.  What would help?  Getting the sales level up quickly, of course, but that’s unlikely to happen.

It’s not the end of the world, but in my forecast GDP growth is lower in all four quarters of 2009.  That makes Q2 virtually flat (just a little positive, though, if you believe the decimal places).  I still have modest GDP growth in the second half of 2009.

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Bill Conerly is principal of Conerly Consulting LLC, chief economist of abcInvesting.com, and was previously Senior Vice President at First Interstate Bank. Bill Conerly writes up-to-date comments on the economy on his blog called “Businomics” and produces a monthly audio magazine available on CD. Conerly is author of “Businomics™: From the Headlines to Your Bottom Line: How to Profit in Any Economic Cycle”, which connects the dots between the economic news and business decisions.