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.

[Georgia Girl 2]

What happens 6 months down the line when you have not moved that inventory? People are not buying anything they don’t absolutely need.

[eyeamok]

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

Only if it is ALL LEVERAGED, which by most accounts it is. Only those that are DEBT FREE will survive when all is said and done.

[SkyPilot]

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

I agree. I am fully anticipating and expecting a shattering collapse of the Stock Market and the US Dollar by this autumn.

[eyeamok]

Here in California the 2 Largest Companies in the Entire State are “For Lease” and “ Space Available”

[Ghost of SVR4]

And yet prices continue to rise.

I don't the "price" is rising, I believe it is because the dollar is getting weaker and has less buying power.

[DuncanWaring]

There were no surpluses in the ‘90s.

[DuncanWaring]

How do you define “surplus” in this context?

[Mariner]

Are you talking about Chevron? HP? Google?

You said the two largest.

[eyeamok]

The vast amount of Commercial Real Estate held by “For Lease” and “Space Available” makes all 3 of those companies look like a mom and pop hardware store.

[KittenClaws]

Let’s translate this into plain English

_________________________________

Thank you!

[StoneWall Brigade]

LS what’s your take on this?

[SkyPilot]

Those that are debt free will obviously do better. Deflation is terrible for all businesses, and in deflation millions more will lose jobs. I see a “global reset” as the option our global political masters will take. It will mean global tyranny and slavery on a scale not seen in all of human history.

[SkyPilot]

I bet, I see the same thing. Industrial parks that in 2004 had zero vacancy are near ghost towns.

[LS]

What prices? Not homes. Not labor. Not tech. Which prices? Gas vacilates between $2.00 and $2.50. In constant dollars that's only about 30% or so more than in 1990.

Some foods have gone up.

Silver and gold are down, or, at least nowhere near what all the alarmists 10 years ago said they'd be.

So I'm searching for these rising prices.

[LS]

No, most prices have not gone up. See my previous post. A few foods. Energy, after a leap around 2007, has been constant to falling (by anywhere from 25-35%).

I just don't see these rising prices.

[LS]

I have not trusted "zerohedge" for some time. First, I still don't see rising prices except for some food items. We shop at Wal-Mart every two weeks, and our bill is not substantially above what it was 3-4 years ago. Neither is our energy bill. Gas has fallen, sometimes by a lot.

Home prices haven't even begun to rise yet, either here in southern OH or in the PHX market we are looking at. I will say that homes are finally moving faster, but the prices haven't recovered.

I haven't bought a car recently, and we only started shopping for major home appliance "refits" to sell our house this year. It appears refrigerators and stoves have gone up some since we bought in 2006 . . . but nowhere near what you'd expect with rampant inflation. Gold and silver are mired at pretty low levels compared to the doomsday predictions.

I STILL think that the productivity burst of the mid 1980s even to the present has run far ahead of the money supply, even with QE1 and 2. I do not think the market has begun to correctly value the phenomenal gains in tech.

[central_va]

What crap computer hardware has been a deflationary spiral since the 1980’s