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Friday, November 09, 2012

Goods Continue to Pile Up in Inventories

Data released today (Friday) shows that goods continued to pile up in inventories, as has been the trend for most of this year, as shown on the graph below.

It's a signal of future business spending (because companies are more likely to purchase goods once they have depleted inventories). The rising trend would suggest that future business spending will decrease and that businesses will have to cut the price of their goods in order to move what's currently in their inventories. This would weigh on their net profits on the assumption that their production costs were done so at inflated prices...not a good sign for Q4 earnings growth.