by Calculated Risk on 2/08/2008 10:22:00 AM

From the WSJ: Wholesale Inventories Build Up

U.S. wholesalers' inventories piled up at the highest rate in more than a year during December as sales plunged, a worrisome sign that unsold goods were piling up on shelves as the economy braked.

Wholesale inventories increased 1.1% at a seasonally adjusted $411.60 billion, after rising a revised 0.8% during November ...

Mounting inventories can be a good sign for the economy, suggesting firms have confidence demand is rising and are, in turn, stocking up to satisfy customers. But it can also mean an unwanted buildup caused by receding demand .... A pileup in inventories does not bode well for future production of goods -- or for future economic growth.

For the current buildup in inventories, the likely explanation is "an unwanted buildup caused by receding demand".