Inventories as Indicators

Economic Scene; Inventory Pileups And Recessions

By Louis Uchitelle

Published: Xxx, NN, NNNN

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NEARLY every economist attempting a forecast these days ends on a foreboding note.

The economy is very robust, they say, and although some of this vigor will soon disappear, the resulting slowdown will be mild. But then comes a worrisome postscript: Maybe the slowdown will not be so mild, after all. As Roger E. Brinner of Data Resources Inc. put it this week: ''A classic recession, beginning in 12 to 18 months, remains a serious risk.''

If a recession were to develop, the first sign of it would probably show up in rising business inventories - a pileup that would go unnoticed for a while. Before almost every recession since World War II, unsold merchandise has accumulated in company warehouses. Inventories, in fact, are rising now, and they might be reaching excessive levels, according to Walter Joelson, chief economist at the General Electric Company.

Many other economists disagree. But no one really knows. Excessive inventories are hard to spot until well after the fact. This is partly because the Commerce Department gathers monthly inventory statistics late. The June numbers, for example, will be announced this Friday - six weeks after June ended - and the August numbers will not come out until mid-October. 

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Note that I blocked the date of this NY Times article.  First lets see if this is on the right track.

FRED ISRATIO:

 

FRED RETAILIRSA:

Looks to me like inventories are only good for predicting the ends of recessions.  The article was from Aug 8, 1988. 

Morning dew on a trap spider web.