In recent decades, with the swing toward a more service-based economy, globalization, low inflation, big data, and just-in-time/lean inventory management techniques, inventories have ceased to play as large of a role in defining the business cycle as they did previously. However, the COVID-19 crisis has prompted some changes across the economy that may result in companies rethinking just how lean they can really afford to be. If there is a tangible shift toward carrying higher levels of inventories, it may come at a cost to corporate profit margins.
In this Economics Weekly, we take a look at the current inventory situation in the United States.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.