business Inventories

Business inventories increased 6.6% from a year ago to $1,580.2 billion.  


Remember it is the change in business inventories that are counted in GDP since the change would represent current production.  An increase in business inventories might signal to producers that they need to cut back on production by hiring less workers.  Indeed, the unemployment rate increased to 8.2% from 8.1% from March.  Real GDP for the year is growing at 1.7%.  These indicators point to a nagging and stubborn continuation of the recession.

AP teachers will note that the data fits the AD-AS model we teach.  During a recession, inventories fall.


The graph is taken from the FRED data base.

Inventories could be increasing because the productivity has increased.  The BLS has all of the productivity measures on their website.  From the BLS, "Productivity declined 0.5 percent in the nonfarm business sector in the first quarter 2012; unit labor costs rose 2.0 percent (seasonally adjusted annual rates)."


This author interprets the increase in business inventories to be a negative indicator for the direction of the economy.