A slowdown is coming - Chart of the day

 

 

This chart shows the inventory to sales ratio of manufacturers, wholesalers and total business (click on the chart to enlarge it). The important feature is that they are all rising. We follow these graphs very closely, as our subscribers know all too well.

 

What does it mean? It means inventories are rising faster than sales. Business does not like accumulation of inventories because is a cost they do not want to incur.

 

Business is going to cut inventory by slowing down production in order to reduce the growth of inventories.

 

Bottom line - the economy will slow down until inventories are brought in line with the growth of sales. We will know business is successful when the inventory to sales ratio starts declining. At that time the economy will start growing faster again.

 

This slowdown will have an important effect on which asset classes will be attractive in the coming months.

 

More details in The Peter Dag Portfolio on www.peterdag.com

George Dagnino, PhD

Editor
The Peter Dag Portfolio
Since 1977

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