Woodley Farra Manion Portfolio Management


	News & Analysis From Woodley Farra

	August 17, 2009 The following chart best describes the current situation between improving demand for all goods compared to inventories since this recession began in the first quarter of 2008. As consumer spending declined and then collapsed following the Lehman Brothers bankruptcy last September, businesses went into overdrive to reduce stockpiles, eventually cutting inventory levels at the most rapid pace since records began in 1947. When the $1 billion cash for clunkers program finally began at the end of July, many auto dealers reported they almost ran out of cars and trucks to sell since the major manufacturers drastically cut output last winter and have been slow to resume production until durable signs of demand emerge. Now the clunker program has been boosted with another $2 billion grant from Washington, those same dealers fear they will lose sales if production does not ramp up fast enough to meet demand. True, the clunker deal may be pulling in demand from future periods, but it may add some momentum to the moribund auto sector. A similar picture emerges for a wide variety of goods as consumers slowly return to the market for the fall and upcoming holidays. Better sales activity will confirm the economy is normalizing at a faster pace than feared earlier this year.