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Inventory Trends Reveal Weak Consumer Recovery

China’s industrial inventory data offer a useful lens into the state of the broader economy’s recovery. Currently, upstream sectors are in the midst of a restocking cycle of raw materials, but downstream consumer-facing sectors are seeing final product inventories accumulating amidst weak final demand. This mirrors the broader trends in China’s macroeconomy, with production rising much faster than domestic demand and household consumption, fueling disinflationary pressures. In addition, China’s industrial recovery in 2020 was clearly led by state-owned firms, while private and foreign-invested firms are sitting on rising levels of finished product stocks.

Posted February 17, 2021
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