With a few exceptions, business inventories appear to be well aligned with sales, which reduces the risk that a buildup of unwanted inventories might act to reduce production in the future.

Data during the late spring and early summer suggested that aggregate demand was stronger than had been previously thought, implying greater momentum in spending. Moreover, the data showed a drop in the pace of inventory accumulation, especially for autos. Therefore, most forecasters were predicting fairly rapid growth for the second half of the year, as firms rebuild their inventories, with a return to trend-like growth in 2006.

GOVERNOR KELLEY.   ...That ability to micro control is going to lead, I think, to more little saw tooth type variations in inventories rather than the large waves that we saw earlier. And I would submit that the likelihood is that the inventory recessions that we remember historically are a thing of the past.

CHAIRMAN GREENSPAN. One would almost assume that, on the grounds that in fully automated retail establishments the bar codes check out what is being sold and items are automatically reordered. So the long lag in bookkeeping, where inventories could build up before one knew it, no longer exists. Adjustments occur very quickly. If sales go down, boom! Suddenly there’s a big shift in the purchasing pattern. The question, however, is how prevalent is this totally automated system.