Summary
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For all intents and purposes, the inventory correction seems to be over among retailers and for the economy on the whole. The ratio of private-sector inventories to final sales in real terms continues to slide and has now reached a level no longer congruent with recession but rather with recovery.
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The ratio of new orders to inventories has now attained a level historically associated with the start of recovery. In fact, such a surge in new orders as at present has always translated into an increase in manufacturing production in the same quarter.
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The recent data concerning the manufacturing sector are corroborated by a recovery in demand in the economy. Investment in machinery and equipment, motor vehicle sales and housing statistics continue to improve as well.
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Looking back, the recession south of the border will have been deep but focused essentially on the goods sector, sparing the service sector for the most part.
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We have good reason to believe that employment is set to return into positive territory with the imminent resurgence of production. Contrary to all previous recessions since 1960, the cyclical component of productivity growth this time was boosted upward during the downturn rather than after it.
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We must also bear in mind that the economy is already in recovery in the third quarter without the budget stimulus effects having kicked in yet. Food for thought.
