BlackRock Investment Institute

Macro insights

Low stocks of finished goods

Many manufacturing companies experienced a surge in demand for goods at the start of the pandemic as people shopped online, while at the same time production became more difficult or was halted altogether. This supply/demand imbalance resulted in a sharp drop in inventories of finished products. See the chart.

Emptying the pantry

Chart showing the demand for goods and falling inventories

Sources: BlackRock Investment Institute and Markit, with data from Haver Analytics, October 2021. The chart shows the Markit Purchasing Managers' Index (PMI) Manufacturing Stocks of Finished Goods Index and Manufacturing Output Index for developed markets (DM) on a rolling three-month basis. A reading above 50 indicates more firms with rising inventories for the former and more firms with expanding output in the latter.

Even when production began to normalize as global economies restarted, demand continued to surge. Supply has remained constrained due to severe disruptions in global shipping and labor shortages, especially in the U.S. That said, the pace of inventory decline has slowed in the latest data – suggesting that the contribution to activity growth might turn positive, in our view.

Though current supply disruptions will likely persist into next year, ultimately we see production recovering as companies not only respond to higher demand but also seek to build stocks back up to above pre-Covid norms to have a bigger buffer in case of future shocks.

Recent macro insights

Manufacturers to slow production
Manufacturers have slowed production substantially in both the U.S. and the euro area, according to survey data.
Financial conditions tightening fast
U.S. financial conditions have tightened a lot since the start of the year – in other words, financing is becoming more costly for individuals and companies. Since then, th...
Less optimism on growth
Economic growth forecasts for this year and the next are coming down rapidly. The OECD last week followed the World Bank in downgrading growth forecasts.
Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Macro Research

Stay ahead of markets with the latest insights from the BlackRock Investment Institute.

Please try again
First Name *
Please enter a valid first name
Last Name *
Please enter a valid last name
Email *
Please enter a valid email
Investor type *
This field is mandatory
Location *
This field is mandatory
Company *
This field is mandatory
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.