Inventory bounce is a term used in
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
to describe an
economy
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
's bounce back to normal
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
levels after a
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
. It is also sometimes called Inventory bounce-back.
Firms usually keep a certain amount of
inventory
Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.
Inventory management is a discipline primarily about specifying the shap ...
. When an economy faces a recession, sales might be unexpectedly low, which results in unexpectedly high inventory. In the next period, firms cut
production
Production may refer to:
Economics and business
* Production (economics)
* Production, the act of manufacturing goods
* Production, in the outline of industrial organization, the act of making products (goods and services)
* Production as a stati ...
so that inventory will drop to their desired levels, which results in even lower GDP. Subsequently, firms might increase the production back up to maintain the usual level of inventory, which causes the GDP to bounce back. This bounce back is called an inventory bounce. We care about it because if GDP recovers is only an inventory bounce, the recovery of GDP might not be sustained, which means that economy might not have truly recovered from the recession.
References
Other sources
*
P. Krugman, "That 1937 feeling," ''The
New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid d ...
'', 2010
* Mark D. Flood, '"Market structure and inefficiency in the foreign exchange market," ''Journal of International Money and Finance'', Volume 13, Issue 2, April 1994, Pages 131-158, a
Science Direct
External links
Inventory bounce may boost Europe's economy
Inventory
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