E A GDPNow Chart Worth Watching

The chart is helpful as a current measurement, with no lag. How accurate it is going forward is important, because huge quarter upon quarter drops in investment could result in a recession. Negative readings in 2015 did not produce a recession but pretty close.

Economist Michal Kalecki believed that we could see where we were in the business cycle by observing business investment, of which inventory investment is an important component. So this additional tool detecting investment early on, without the customary lag, could prove helpful. Kalecki believed that investment drives the business cycle.

If inventory declines further, it may be necessary to take profits in the retail sector (XRT)






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Disclosure: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment ...

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Gary Anderson 4 months ago Author's comment

Update: Inventory investment is cratering. See this chart. New data!

Norman Mogil 8 months ago Contributor's comment

This is a very good discussion on the role of inventories in the business cycle. Most recessions can be traced to mismatched inventories to sales. This is certainly happening as the Trump tariffs play havoc with supply chains in basic industries. So you are right to bring this issue to the fore.

David J. Tanner 4 months ago Member's comment

Very true.

Gary Anderson 8 months ago Author's comment

Thank you, professor. I certainly hope the inventory investment chart does not get too ugly going forward