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Destocking & inventory correction cycle
What it is
When buyers hold more inventory than end demand justifies, they stop ordering until it clears. Production then falls further than consumption, and suppliers several steps upstream see order books empty while end demand is unchanged
The effect amplifies with distance from the final customer, so intermediates and raw material producers experience the sharpest swing
Impact on industries
- Order books can collapse without any fall in underlying demand, which makes upstream revenue a poor read on the end market
- Falling prices during a correction delay restocking further, since buyers wait for the bottom - so volume recovers before realisation does
- It is a cycle rather than a structural break, and the correction ends when channel inventory normalises
- Distance from end demand determines exposure, so the same event is mild for a brand owner and severe for its intermediate supplier