Jeremy Warner: Are these green shoots, or just the end of destocking?

Outlook One of the main reasons international trade and industrial production have fallen off a cliff over the past six months is because of a massive and all-embracing inventory adjustment across all sectors of the world economy.

Nowhere is this more visible than in first-quarter results from Nokia, announced yesterday. Net profits are down by a stomach-churning 90 per cent after a year-on-year fall of nearly 20 per cent in handset sales.

Olli-Pekka Kallasvuo, Nokia's chief executive, attributes the great bulk of this fall not to the underlying state of the market, though this too is depressed, but to the fact that, in an effort to cut costs and address the issue of scarce credit, distributors have considerably reduced their stockpiles.

Typically, retailers have carried around six weeks of stock. Now they are down to four weeks or lower. Mr Kallasvuo reckons the inventory adjustment is now largely over, and is therefore sticking by his previous guidance that handset sales for the year as a whole will be down by no more than 10 per cent.

If a similar pattern is mirrored across industrial sectors in the coming months, we ought soon to see a quite considerable recovery in down-in-the-dumps industrial production. But don't hold your breath. Once companies get used to running on slimmer inventories, they tend to stay that way. With the inventory adjustment over, shipments ought to recover a bit, but to a lower base load than previously.