Inventory developments in the euro area since the onset of the crisis

This section analyses the changes in inventory behaviour in the euro area since the onset of the global financial crisis. Despite the fact that inventory investment is only a small part of fixed investment it contributes significantly to variation in GDP growth. National accounts show that the crisis has led to depressed inventory investment, thus pushing down growth. The change in firmsí inventory behaviour since the crisis is also visible in industry survey responses which suggest that firms are now adjusting their inventory stocks downwards more strongly than before. An econometric analysis for Germany, Italy and France indicates that this change in behaviour may in part be ascribed to depressed sales prospects in the wake of the sovereign debt crisis. In addition, financing constraints affect inventory decisions and have become more important since the beginning of the crisis. This further confirms that restoring the flow of credit, especially to smaller firms, is of critical importance for growth.