Britain’s manufacturers cranked up in May, raising hopes that the economy has escaped the slow patch in the opening months of the year.
Last month factory output grew at the strongest pace so far this year. The relevant segment of IHS Markit’s purchasing managers’ index – an influential private sector survey – hit 56.9 in May, up from 55.4 in April and well above the 50-level which denotes no change on the month.
However, domestic demand remains sluggish and much of the extra output has gone into rebuilding stockpiles of goods, rather than being sold to customers.
That is, supply doesn’t create its own demand?
There is something here though. Back in that Great Moderation people were wondering why it was moderate? One point being those stock levels. JIT and all that meant that stock levels across the economy were very much lower than they used to be. We just didn’t need to have 2 or 3 or 6 month’s supply of crud in order to keep ticking over. And stock levels varying was one of the great drivers of both boom and bust.
So, lower stock levels in general and booms and busts would be less extreme – moderation.
Note that it took a financial crisis, not the more usual boom and bust of the economy in general, to have a recession.