In the second quarter, the U.S. economy suffered another significant inventory liquidation: As a percent of real GDP, inventory reductions subtracted 1.1% from overall real growth. As shown in Chart 1, as a percent of real GDP (red dotted line), last quarter’s inventory draw-down was the second-largest since 2020 and the fifth-largest back to 1950. On a trailing four-quarter basis (blue line), the paring down of inventories in relation to real GDP in the contemporary period is also the fifth-largest since 1950!