One of the key questions with regard to economic activity is the extent to which it is being driven by inventory replacement.   As seen in the CalculatedRisk blog of March 12, “the contribution to GDP in Q4 from ‘Change in private inventories’ was 3.88 of the 5.9 percent annualized increase in GDP.”

Here are two charts that give a historical perspective…

This one is from the aforementioned CalculatedRisk post of March 12, in which he states: “…clearly most of the inventory adjustment is over.” :

Here is another look at inventories, from of April 15, 2010, in which it says “…clearly most of the inventory adjustment is over.”:

Another key question is whether current inventory levels are appropriate given the future sales environment.

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SPX at 1192.38 as this post is written