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Pesky Little Devils

10/29/2016

I wish it wasn’t so hard to get the cork back into champagne bottles!  After release of the latest report on GDP growth in the third quarter (Q3), showing it grew at an annual rate of 2.9% instead of the expected 2.5%, I was ready to pop the cork and celebrate.

Unfortunately, there were two devils in the details.  First, exports were stronger than expected.  But, wait a minute – how can exports be improved when the dollar is so strong?  The reason is soybean crop failure abroad caused increased exports of US soybeans.  The second devil in the details was that inventories increased, causing an increase in GDP.  But, wait a minute – is that good or bad?  Businesses increase inventories when they expect sales to increase and need the inventory to sell, so it must be good, right?  Maybe!  When customers decrease buying, inventories tend to build, so an inventory build-up must be bad, right?  We don’t know yet, as economic data on the consumer is conflicting.  Stay tuned . . .

Now, I wonder if the inventory level for champagne is increasing or decreasing?

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