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Trivia Tidbit Of The Day: Part 125 -- The Amazing American Economy.

The U.S. Economy-

In several recent Trivia Tidbits, WILLisms.com has offered a look into the American economy. The bottom line: it's looking pretty darn good.

On Friday, GDP growth numbers were released, indicating that in the Second Quarter of this year, the American economy, despite relatively high energy prices, expanded by 3.4%. But did you realize how Inventories affected GDP growth in Q2:

...were it not for a significant drawdown of inventories during the April-June period, the economy's growth rate last quarter would have been much higher. Final sales of domestic product, which represents GDP less inventory changes, grew at nearly 6 percent last quarter. Firms will need to replenish their inventories, and that process will contribute to a growing economy.

Indeed, according to the Bureau of Economic Analysis, low inventories shaved 2.32% off 2nd Quarter GDP growth. Most analysts do not expect low inventories to last.

To make an analogy, low inventories are one of the few parts of GDP growth that are only bad news in the very short term. Think of it like a tightly-twisted coil. It may seem like it's significantly contracted (and it is, for now), but it's really just getting ready to spring forth.

And with today's strong manufacturing numbers, American businesses are clearly replenishing those inventories in this quarter.

Previous Trivia Tidbit: NBA.

Posted by Will Franklin · 1 August 2005 12:07 PM

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