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US Business Inventories Remain Stable

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US Business Inventories Remain Stable

The US Census Bureau has today released the February reading of the Business Inventories data. This is showing an increase in manufacturing, wholesale and retail inventories of 0.4% for the month. This is stable on last month’s number of 0.4% however the market had expected a reading of 0.5% today.

These numbers reflect the strength of the US recovery and nicely fall into line with the accelerating growth rates and falling headline unemployment narrative that has been formed around the US economy. Government authorities have been particularly keen to spread this message about the US recovery, this is understandable as it is a simple and positive message that readily translates into votes. It is also largely a responsible thing to do, the message on the surface is true, and by encouraging further confidence in a recovering economy it holds the potential to become a self fulfilling prophecy.

US monetary authorities as well as independent economic observers such as the IMF however are much more conscious that while the North American economy is moving in the right direction, it is far from clear of the trees. Government will tout the fact that it’s attempts to fiscally stimulate the economy during the crises amounted to approximately 5% of GDP, however it will take the economists to point out that the other measures by the same fiscal authorities removed roughly twice that amount from the economy over the same time period.

By the same token you have to read the small print to understand the true nature of the unemployment statistics, the headline unemployment rate is clearly on it’s way back to 6% and even below over the coming months. Some allowances have to be made for the fact the workforce has shrunk over the course of the crises and therefore today’s 6% is not quite as positive as a 6% reading would have been three years ago, however this distortion is largely understood. The real problem lies in the fact that many of the jobs that people are now regaining are at considerably lower hourly rates than the jobs the lost during the crises.

The Federal Reserve has been attempting to highlight this flaw in the US recovery for over two months now. It is hoped that the prominence that was given to this situation at this weekend’s IMF conference can contribute enough momentum to spur some remedial action by the fiscal authorities.

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