Thursday, 20 August 2009

The third quarter recovery

For the three last quarters, UK firms have run down their inventories. In fact, the run down during the second quarter of 2009 was the largest quarterly percent decline in fifty years.

Firms can not continue to run down their stocks for ever. During every recession, businesses tend to overdo it and "over empty" their warehouses, creating shortages. The UK economy is probably close to that point right now. Firms will soon start to replenish stocks creating a temporary boost in GDP growth.


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Anonymous said...

If their stocks are of useless plastic tat, cheap jewellery, expensive designer clothes, or electronic gizmos, I don't think they'll have to restock any time soon. How many people have enough credit left to buy that stuff anyway?

Businesses stocking food and other necessities have probably been replenishing their inventories all along.

This isn't the type of recession that inventory restocking can take the lead. This is a debt depression.

electro-kevin said...

I bought a microphone the other day. I purchased it through my local music shop as I believe in shopping locally. It cost me 20% more to do it this way (£22) which is a sizable amount.

Internet firms are still selling them at last year's prices because they bulk buy imported stock. No matter how altruistic I intend to be towards local traders it's difficult to ignore such a disparity.

The import shock is yet to hit us - I figure 20% up on newly imported manufactured goods if my experience is anything to go by.

Anonymous said...

LOL - extrapolating out your purchase of a microphone to the whole economy.. classic.

Especially as internet retailers sell things cheaper than bricks n mortar retailers anyway!

Bill Quango MP said...

The import is more mixed EK.
At the start of the year 20% was about right but as the post says restocking was minimal so prices fell back.
By delaying order purchases until May firms may have gained a little back on the weak £.

The temporary GDP growth is coming and yes, it will be temporary

electro-kevin said...

Points taken.

electro-kevin said...

I was suckered on that microphone, nay ? )-:

One for you, Alice.

Hannan strikes again.