Inventory bounce is a term used in

economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...

to describe an

economy An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

's bounce back to normal

GDP Gross domestic product (GDP) is a monetary measure of the total market value of all the final goods and services produced and rendered in a specific time period by a country or countries. GDP is often used to measure the economic performance o ...

levels after a

recession In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be tr ...

. It is also sometimes called inventory bounce-back. Firms usually keep a certain amount of

inventory Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying ...

. When an economy faces a recession, sales might be unexpectedly low, which results in unexpectedly high inventory. In the next period, firms cut

production Production may refer to: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a stat ...

so that inventory will drop to their desired levels, which results in even lower GDP. Subsequently, firms might increase the production back up to maintain the usual level of inventory, which causes the GDP to bounce back. This bounce back is called an inventory bounce. We care about it because if GDP recovers is only an inventory bounce, the recovery of GDP might not be sustained, which means that economy might not have truly recovered from the recession.

References

Other sources

* P. Krugman, "That 1937 feeling", ''The

New York Times ''The New York Times'' (''NYT'') is an American daily newspaper based in New York City. ''The New York Times'' covers domestic, national, and international news, and publishes opinion pieces, investigative reports, and reviews. As one of ...

'', 2010 * Mark D. Flood, '"Market structure and inefficiency in the foreign exchange market", ''Journal of International Money and Finance'', Volume 13, Issue 2, April 1994, pages 131-158, a
Science Direct

External links

by Paul Krugman, April 30, 2002, ''The New York Times''
Inventory bounce may boost Europe's economy
, May 27, 2009, Reuters bounce {{Economics-stub