Biggest Inventory Build In History Prevents Total Collapse Of The US Economy

Zero Hedge ^ | 04/29/2015 | Tyler Durden

[SeekAndFind]

While we already observed that in Q1, US GDP rose by an appalling 0.2%, far, far below the consensus Wall Street estimate (in case you missed it, here again is the one thing every Wall Street economist desperately needs) and precisely in line with the Atlanta Fed forecast which we brought attention to in early March, confirming yet again that US stocks no longer reflect any fundamentals but merely Fed and global liquidity injections, there is something far more disturbing under the surface of today's GDP report.

Inventories.

Specifically, the $121.9 billion increase in private, mostly nonfarm, inventories in the first quarter.

Cutting to the punchline, this was the biggest inventory build in history.

 

Another punchline: in Q1 2015, the US economy rose by a paltry $6.3 billion in nominal terms to $17.710 trillion.

Here is how the total GDP growth compares to just the increase in inventories, which as we wrote earlier this week, is the primary reason why the world is now gripped in a global deflationary wave.

 

In other words, if US inventories, already at record high levels, and with the inventory to sales rising to great financial crisis levels, had not grown by $121.9 billion and merely remained flat, US Q1 GDP would not be 0.2%, but would be -2.6%.

Oh heck, just round it down to -3.0%

Which means that as this massive inventory overhang is eventually cleared out (once the US runs out of space to store all these widgets, gadgets and raw materials, here's looking at you Cushing) and there has been $1.1 trillion in consistent inventory build in the past 3 years, US GDP will be pressured even more with every passing quarter, or else the moment of deflationary rapture when everyone is forced to liquidate and/or dump this inventory at the same time, will result in a monetary supernova which will leave the Fed with no choice but to literally paradrop money on the continental US.

[eyeamok]

If you Subtract Government DEFICIT SPENDING, there has NOT been a Single Quarter in 30 years with a POSITIVE GDP!!!

[SeekAndFind]

RE: If you Subtract Government DEFICIT SPENDING, there has NOT been a Single Quarter in 30 years with a POSITIVE GDP!!!

Does that include the Reagan era?

[eyeamok]

YES, That is when it started.

[Eric in the Ozarks]

WSJ reported there is an over supply of damned near everything in the US...

[Bratch]

And yet prices continue to rise.

[eyeamok]

ESpecially UNEMPLOYED people, which is why they are so damned intent on a New Free Trade Deal, to make sure ALL Middle Class Jobs and Manufacturing in the US ceases to exist, Nafta only got rid of 3/4 of manufacturing.

[Eric in the Ozarks]

Not for corn, soybeans, iron ore, gold, petroleum products...

[MaxMax]

[eyeamok]

And yet prices continue to rise.”???

NO THEY AREN’T, The VALUE of your MONEY is being STOLEN at a faster rate than ever before since Jimmy Carter. Some call it inflation, in reality it is THEFT BY COUNTERFEITING.

[IYAS9YAS]

And yet prices continue to rise.

That's because they've over-increased the inventory of dollars, too.

[SaxxonWoods]

Zerohedge finally figures out we are heading into deflation rather than hyperinflation.

It’s only been obvious since about 1992.

Can’t wait for the next exciting revelation from these eggs-spurts.

[eyeamok]

KD over at marketticker.org laid this all out a year or so ago, I believe you have to back to 1984 to find a POSITIVE GDP after you subtract Deficit Spending.

[tanknetter]

What about in the mid/late 1990s with the GOP Congress surplusses and Dot.Com boom?

[eyeamok]

Deflation is a Positive for we the people, especially if you are debt free.

Inflation is BAD for we the people, but good for Government and the Welfare State. In fact it is the ONLY WAY to have a Welfare State, constant devaluation of monetary units.

just go back and look at inflation rates before and after LBJ’s War on the Family began, it only took 6 years until President Nixon DECLARED BANKRUPTCY of the USA, and he officially signed the proclamation of BANKRUPTCY on 8-15-1971

[PTBAA]

OK, THAT is creepy!!!

[SkyPilot]

Biggest Inventory Build In History

Let's translate this into plain English: Companies cannot sell their goods because no one is buying them in anyway near the numbers of what they have in stock, so instead of throwing their goods in the trash can or selling them at a loss, they are sticking them into warehouses.

They can only get away with that strategy for a very limited amount of time.

And yet prices continue to rise.

True. We have come to expect inflation, and it has been cancerous during the Obama era. However, the BLS and other government agency simply lie about the data. They do this so as to not have to pay increased COLAs to Social Security, military retirement, Federal retirement, and other recipients. They also do it for political purposes to mask the real high inflation rate.

Furthermore, the sinking middle class cannot afford the goods and services being offered at the current prices.

Small businesses are dying, and in order to attempt to keep up with increased fees, taxes, and liabilities, they are trying to pass on their costs to their consumer customers.

So if you go to your local small car repair shop, house pressure washer business, or pool cleaner - they hand you an estimate for their labor that is out of this world.

People are balking, and either doing the labor themselves or putting off repairs.

The economy has no where to go. Meanwhile, Europe is on a roller coaster downhill toward negative interest rates, which threatens to blow up the entire global economic system.

[eyeamok]

What about in the mid/late 1990s with the GOP Congress surplusses and Dot.Com boom?

NEVER HAPPENED, There has not been a Surplus since Andrew Jackson was President.

[SkyPilot]

Deflation is a Positive for we the people, especially if you are debt free. Inflation is BAD for we the people, but good for Government and the Welfare State.

That is true.

Deflation is also bad for small business and those who are trying to sell goods or services.

[eyeamok]

The economy has no where to go.

Oh yes it does, you ain’t seen nothing yet, it’s still a long ways to the bottom, and it is rapidly approaching.