Growing Inventories Means Lower Prices & Discounts Could Be Coming

As the pandemic created supply constraints over the past two years, companies learned to stock up on materials and finished products in hopes of alleviating any future supply chain snags.

Now that constraints have lessened and various supply chains have resumed operations, companies have been accumulating raw materials and building a stockpile of finished products at an incredibly fast pace.

Historically, increases in inventory levels for companies is seen as an indication that demand for their goods might be weaning due to a pullback in business and consumer demand. As inventories swell, companies are eager to reduce stockpiles by discounting, which ultimately means lower prices for consumers.

Source: Federal Reserve Bank of St. Louis

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