2017 First Half Prediction: Stability But Minimal Growth

Jon Economy, Market Commentary

Finally… the US industrial economy has some good news.
Goods demand has stabilized and inventory drawdowns are over.
As the chart of inventory shows, starting in the second half of 2015, companies began cutting down on stockpiles. This matters because companies don’t hire or spend when their end-users are saying they have enough stock on hand.
(Payrolls suddenly stopped growing from 240K per month in 2014 to 220K in 2015 and then 160K in 2016.)
Hear Marc Levinson on An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy
The US industrial economy has been in a holding pattern of sorts as they bled off the inventory overhang (too much supply for existing demand). The order of the day has been to make less: factory production was cut – Factory Capacity Utilization has fallen to 2014 levels – along with payrolls.
Once the equilibrium shifts away from excess supply, business investment will start to tilt up.

This post was published at FinancialSense on 01/03/2017.