Bloated Inventories Are Poised to Slow the U.S. Economy
Getting rid of those excess stockpiles will have negative effects that are mirror images of the positive effects of building them.
Stores are well stocked.
Photographer: Keystone View/FPG/Getty Images
Don’t be fooled by the Commerce Department report Thursday showing the U.S. economy grew at a faster-than-expected annualized rate of 6.9% in the fourth quarter. Look under the hood of the gross domestic product report and it’s clear that there’s a big inventory cycle unfolding in the economy as consumer demand wanes following a large buildup in the supply of goods. So now, the negative economic consequences of unloading unwanted inventories are about to begin.
Spurred by warnings of potential shortages during the holiday season, retail sales jumped an unusually large 1.8% in October from September. Stores rushed to secure goods, with the combined inventories of Walmart Inc. and Target Corp. surging to $72.4 billion in the quarter ending Oct. 31 from $64.6 billion a year earlier. Nevertheless, consumers finished most of their buying by Thanksgiving. Shoppers in stores and online between Black Friday and Cyber Monday totaled 180 million, according to the National Retail Federation, down from 186.4 million in 2020, which was below the pre-pandemic 189.6 million in 2019.