March 11, 2015
The economy is lean and operating as if robust. This can lead to schizophrenia where companies produce for stakeholders under blue sky philosophy while stock piling for better days. This is market conundrum and a process for economic instability. When big businesses activate production based on a blip in time the end result is unsustainable propping up the bubble until the burst.
Reuter’s reported the “U.S. wholesale inventories unexpectedly rose in January as sales recorded their biggest decline since 2009, lifting the number of months it would take to clear warehouses to its highest level in more than 5-1/2 years.” Now crude oil prices has become the scapegoat for all over and under reactions to the economic shocks. Reduction in crude oil has assisted middle class.
“The Commerce Department said on Tuesday wholesale inventories increased 0.3 percent in January after being unchanged in December. Inventories are a key component of gross domestic product changes. With sales falling 3.1 percent, the largest drop since March 2009, that means it would take 1.27 months to clear shelves – the most since July 2009. The inventory-to-sales ratio was at 1.22 months in December.”
The inventory situation is another predictor of decision-making in the clouds. The ability to effectively operate lean toward sustainability is the new-new management style. The days of heavy production cannot meet the ongoing changes in purchasing power and choices. There is a nexus between its economic strength of its citizens and businesses (small-to-large). I predict the impact will be longer than the projected 5-1/2 years considering as the report was produced and more inventory was produced creating additional products. The trend stops when new thinking and processes are implemented- new approaches are required. How can their be more product than buyers or desire and/or ability to buy- quixotic.