A new buzzword is being used by economists and manufacturers alike, it’s called destocking. In fact, it’s nothing new; it’s just something that manufacturers have not invoked in such a long time that everyone has forgotten. Towards the end of 2008, retailers and distributors reduced their inventories as consumers tightened their belts and stopped spending. In response the manufacturing sector has been destocking, or in other words they have reduced their output.
In a buoyant economy the lower inventories at retailers would have initiated a demand for product from the manufacturer. However in this time of destocking, the manufacturers have reduced their output to reflect the reduction in consumer spending. Last week, Pat Campbell, the CFO of 3M, told analysts that destocking at 3M started in November and will last until the second quarter of 2009.
The destocking underway at manufacturers appeared in government data for December 2008 when wholesale inventories in the US, which is the stock of goods held by middlemen in the supply chain, fell 1.4 percent in December, the largest drop in almost 17 years.
In a buoyant economy the lower inventories at retailers would have initiated a demand for product from the manufacturer. However in this time of destocking, the manufacturers have reduced their output to reflect the reduction in consumer spending. Last week, Pat Campbell, the CFO of 3M, told analysts that destocking at 3M started in November and will last until the second quarter of 2009.
The destocking underway at manufacturers appeared in government data for December 2008 when wholesale inventories in the US, which is the stock of goods held by middlemen in the supply chain, fell 1.4 percent in December, the largest drop in almost 17 years.
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