It’s a sight depressing enough to convince even the most optimistic economist that we’re plunging into a global recession. Row upon row of thousands of cars, worth millions of dollars, just sitting there, unwanted. They’re reportedly piling up at the Port of Long Beach in California, where major carmakers have been forced to lease acres of extra space to store them.
It’s not just cars that are piling up. Growing inventories of supersized flat screen TVs are forcing retailers to slash prices, according to analysts. Meanwhile, in China, there is
more than a year’s supply of appliances sitting in warehouses destined for nowhere. That few people are buying new products for their houses isn’t surprising—after all, in the U.S., the inventory of unwanted houses is building up too.
Across the continent, all kinds of goods are being stockpiled as orders shrink, says a report from the Institute for Supply Management. “It appears that manufacturing is experiencing significant demand destruction as a result of recent events,” wrote the ISM’s Norbert Ore. That’s bad news for the fate of the economy. “Inventories are pretty much the best way to predict a recession,” says Daniel Trefler, a professor of competitiveness at the University ofToronto. A buildup in inventories typically marks the beginning of an economic downturn, he says. “It’s a very strong signal.”
This pattern has some concerned about the more ominous threat of deflation—a period of declining prices and income levels. That will be “the next major macroeconomic theme,” David Rosenberg, chief North American economist at Merrill Lynch, wrote in a report to clients. But in the short term, the glut of increasingly cheap, unwanted goods isn’t necessarily all bad. For shoppers, it could mean a little extra money in your pockets. Enjoy it while you can. M
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