All you need to know about the surge in Q3 GDP is in the charts below:
Did the weather change in 2013 so much to account for a huge production surge (without a similar change in sales)? Is no-one buying US food products? Perhaps data collection methods a little askew?
There aren’t any obvious answers here. The scale of both makes it look like the outlier scenario is most plausible, particularly given the farm data, but other anecdotes share the same conclusions – though to different degrees. It’s amazing to think that if this is “real” then businesses have gone so far out of historical norms in 2013 to pile on inventory.
If I had to guess, I would say that it is probably a little of both. There is no doubt there is an inventory buildup taking place, and at an immense scale in Q3, but it may also be exaggerated by statistical processes that aren’t fully calibrated to the current structural deficiencies in the economic system.
To further that point, we can simply look at GDP growth absent inventories.
In the past three quarters, inventories have accounted for 55%, 61% and 57%, respectively, of all GDP growth. You typically see those kinds of proportions late in economic cycles. In absolute terms, the increase in total private inventories is, by far, the largest in history. In percentage terms (of GDP), it was the biggest change in inventories since the middle of 2000.
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