As the pandemic began in early spring of 2020, the U.S. economy faced significant supply disruptions: Many local and state governments mandated the shutdown of non-essential production of goods and services to various degrees.

Although production declined, American households still demanded goods as part of their daily lives. Income support from the federal government also bolstered the purchasing power of many households, and thus there was much less of a contraction in total demand than would have occurred otherwise.

So, where do the goods that are consumed in a given month, quarter, or year come from, if not from production? Here we focus on one channel: inventories—specifically, the change in inventories, also called inventory investment. This is the difference between production and sales over an interval in time. Inventory investment includes materials, works in progress, and finished goods.

Early in the pandemic, there was a tremendous drawdown of the nation’s inventories. The change in inventories (which is negative when inventories are falling) is one component of a nation’s investment, which in turn is one component of that nation’s gross domestic product. The change in inventories (seasonally adjusted annual rate) went from a modest –$20.6 billion in the first quarter of 2020 to –$289.9 billion in the following quarter. This was the all-time low for this measure. As is often the case as an economy recovers from a recession, the change in inventories bounced back quickly into positive territory in the third quarter of 2020.

How this graph was created: Search for and select the “change in private inventories” series from 1947 to the present. Adjust the time interval using the options available (the slider below the graph or the boxes in the upper right-hand corner) to zoom in on the pandemic period.

Suggested by Bill Dupor.