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The problem is the inventory overhang.
How big is the equipment inventory overhang?
There are two major causes of the inventory overhang.
Economists said that builders would continue scaling back this year to wring out the current inventory overhang.
Analysts fear that an increase in foreclosures will only add to the inventory overhang, pushing prices down further.
When manufacturers finally realized what was happening, they had to cut production sharply, not only to match lower sales but to eliminate their inventory overhang.
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Finally, there's an "inventory bounce" when the overhang is gone.
As for the slight overhang of inventory, he suggested the excess reflected co-op owners' optimism that their properties would sell: "Typically in this region," he said, "an improving market encourages potential sellers to list their properties, and thus, contrary to classic supply-and-demand theory, inventory actually increases even as sales volume increases".
We just have to carry the overhang of inventory for a while until the system works it out". Several things.
When actual demand didn't match the bullish forecasts, what remained was a massive overhang in inventory that has only recently evaporated.
That gives some hope that the overhang in inventories may be easier to deal with than it used to be.Nonetheless, managing the recession will still be difficult for executives who have long since forgotten what the previous one felt like.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com