Bulging stockpiles are holding back the US economy

One of the few times when stocks rising is bad news.
One of the few times when stocks rising is bad news.
Image: AP Photo/Gene J. Puskar
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In the US economy, which really depends on the consumption of stuff, there’s too much stuff.

The US’ second estimate of its third quarter GDP saw the economy expand at a 2.1% annualized rate (pdf), faster than the initial 1.5% growth estimate. The reason why? Inventories. Business stockpiles are a little less massive, dragging growth down by 0.6 percentage points instead of the 1.4 points of the first estimate.

But there are still giant piles of unsold stuff. And that’s a concern, for there’s clearly a misalignment between corporate expectations of demand and actual demand.  Indeed, private consumption growth number was revised down to 3% quarterly growth from 3.2%.

“The larger inventory build suggests some downside risk to Q4 growth estimates,” wrote Bank of Montreal’s economics team in a note to clients.

Not everyone is particularly bothered, though. If you’re TJX, the parent company of the discount retail chains TJ Maxx and Marshalls, you’re licking your chops, as CEO Carol Meyrowitz did metaphorically on the company’s earnings call last week.

“We see a marketplace loaded—I say loaded—with quality branded merchandise and we are in excellent inventory position to take advantage of these great opportunities,” she said.