ABSTRACT
Unlike the period from the end of World War II to mid-1947, with its readily discernible sequence of demobilization and recovery to high levels of activity, the period from the second half of 1947 to the end of 1949 contains conflicting tendencies, changes in the levels of activity in some parts of the economy being offset by changes in others. Judged by final sales to households, business and government (excluding change in inventories), the 1947-49 period is one of slow but steady growth. Judged by final sales of goods alone, as shown in Table 6.1, the period is one of no growth from the second quarter of 1947 to the third quarter of 1948, but some growth thereafter. In contrast to final sales, output rose during 1947 and 1948 after which it fell substantially in the first half of 1949. Inventories consequently accumulated at an increasing rate from late 1947, and the fall in output in 1949 matched a large fall in inventories. After output started to rise again in the second half of 1949 the inventory decline tapered off, although the renewed growth in inventories of durable goods was seriously upset by the steel strike in the final quarter of 1949. By 1950 I the recovery in output was strong and general, and both final sales and inventory accumulation were rising. In the overall picture the special position of inventories is clear: without the rise and fall in inventories in 1948-49 (and disregarding multiplier effects on final sales) output would have grown at a rate of about 3^ per cent per annum throughout 1948 and early 1949 and there would have been no recession. Interest must centre on the cause or causes of the cycle in inventory accumulation.
