The return of the inventory cycle

Remember the Great Moderation? This refers to the period before the global financial crisis of 2007-09 during which there was a marked fall in the volatility of gdp growth in rich countries. Explanations for it ranged from wiser monetary policy (yes, really) to globalisation. In fact, much of it was down to something more mundane: smaller inventories. One authoritative study found that more than half the improvement in the stability of rich-world growth was explained by diminished inventory cycles.