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An Inventory Pileup Promises To Make Waves Overseas


Economic Trends

AN INVENTORY PILEUP PROMISES TO MAKE WAVES OVERSEAS

An emerging inventory correction signals troubles for America's trading partners. To be sure, the latest cutbacks in U.S. industrial production and factory employment indicate that overly optimistic domestic producers contributed to a minisurge in stocks. But economist Richard B. Berner of Salomon Brothers Inc. thinks exporters to the U.S. may be taking a bigger hit. Berner notes that between the first and third quarters, real merchandise imports jumped by some $58 billion, double the rise in domestic final demand. "The parallel upswing in inventories, especially at wholesalers and retailers, strongly suggests that a major portion of those stocks went into imports," he says.

The upshot, says Berner, is that imports are likely to slow significantly in the months ahead, as wholesalers and retailers try to bring inventories in line with demand. And while that will help the trade balance for a while, it will also add to the problems of sluggish economies overseas.GENE KORETZ


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