Global Business Inventory Index

This thought was posted on Thinkaloo on 4 April 2008 by member businessmind

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What about a global business inventory index that is reported monthly online? I think this will help everyone know whether a global or national recession is on the way or not. In order to have a sense to predict recession, I use the following simplification: if supply exceeds demand, businesses build excess inventory they then have to sell at discount before they produce more or place more orders.

Therefore, if you knew how total business inventory fluctuates, then you can reliably predict if a recession is on the way and based on the rate of inventory disposal how long it will last. Such knowledge would also help capital to be invested with less risk.

I don't think such knowledge would help avoid recessions caused by financial institutions overextending credit and loosening their lending standards. It can help detect, however, the health of companies and businesses outside the financial sector. They are the main driving force behind economic growth as they are the producers of the goods and services we consume and invest on.

My proposal might be a simplification but I have always wondered. With the multitude of news sources and economists making all sorts of predictions, why can't we have all the numbers reliably concentrated in one source from which the big picture conclusions are drawn first!

When people invest they often ask: "Where should I invest my money?" or "Is it safe to invest my money in this asset or the other?" You rarely hear people asking "What is the state of the global economy?" etc

When global economy goes into recession, however, everyone gets affected and the word "recession" is in everyone's mind. If, at that point, you could get online and check where we stand in the business cycle, wouldn't that help you make more informed business or investment decisions?