Last week we learned the U.S. economy grew 2.7 percent in the third quarter, a good bit faster than the 2 percent originally estimated. On the face of it, that’s good news. But most economists took one look at the revised data and immediately chopped their estimates for fourth-quarter growth. What spooked them? One word: inventories.
Businesses spent a whole lot more money restocking their shelves in the third quarter than they did in the second—$61.3 billion vs. $41.4 billion. That’s much faster than the fundamentals would support. In fact, total sales were actually revised down in the third quarter. In the face of slowing consumer demand, it’s going to take a while for businesses to sell all that stuff they bought over the summer, and they probably won’t be purchasing much of anything toward the end of the year.
Source: Bloomberg Businessweek. Read full article. (link)