Inbound container volumes to the US are reverting to pre-pandemic levels
freightwaves.com
freightwaves.com
For many classes of bulk goods, freight was becoming 50-100% or more of total landed cost for goods imported from China, which overwhelmed labor cost differentials. In addition, Chinese production problems provided more reasons to move production closer to demand.
But US labor costs increased substantially during the labor crunch of 2021. Prevailing wages that were around $15 ramped to $18-22 as companies worked to compete against the likes of Amazon hiring hundreds of thousands of warehouse workers. Entry level Chinese wages have not increased nearly as much.
So if freight costs collapse such that the landed cost only has 25% of landed cost as freight, and US manufacturers have experienced an increase in labor costs relative to Chinese production, this could spell some very challenging times over the next 1-2 years as a recession applies cost management discipline on the supply chain and US manufacturers find themselves in potentially an even worse comparative cost position than pre-pandemic, vis-a-vis offshore production.
This is also why many US manufacturers were wary about adding capacity: they know about the bullwhip effect, and they also knew that it would affect not only consumer demand but also their supply chain advantage versus offshore production, and so any capital intensive capacity added to meet short-term demand may go idle 1-2 years afterward. And most manufacturing capacity doesn't pencil out if you only get a couple years of good utilization out of it.
"Friend shoring" [1].
[1] https://www.bloomberg.com/news/articles/2021-06-24/-onshorin...
Mexico already has the “maquiladora” model were raw materials flow tariff free into the factory in Mexico, get assembled / transformed there, and go back across the border to the US duty free
You’ve just described Qatar, Bahrain, UAE etc.
Maybe reconsider why local labour is expensive and why it’s worth paying for.
OP said they would be "in US jurisdiction," and thus, presumably, subject to American labor laws. What I think they were suggesting was a visa-free zone within the U.S., which is an interesting idea.
> corporations would be in US jurisdiction but the employees could flow through with minimal overhead
It implies to me that the corporations get to be US based and reap those benefits while employees are not and can be taken advantage of.
Though I do agree with you - there’s a few experiments happening with special economic areas / designated cities in a few places (again, a few in the Middle East) to attract talented individuals and companies to whom local laws may not apply.
Assuming its highly regulated with US minimum wage laws - a SEZ would be much more about arbitraging the strong US dollar/US High Cost of Living (which is strong due to the US's Tech/Finance/Trade strength leaving US manufacturer stuck) versus the more moderate Mexican peso/lower cost of living.
An employee from Mexico working at US factory would be living quite well if they could freely go back after work to living south of the border.[1]
I'd also mention the realistic alternatives to this are: - just import finished goods from other developing countries produced under highly unknown labor or - locate the factory fully within the US and have the undocumented employees cross the border illegally and live in precarious, unmonitored conditions hundreds of miles away from their families and exacerbating housing issues.
[1] Apartment in Matamorosa Mexico is $400 versus $1020 in McAllen, Texas
We need to stop being so hung up on ethics that we fail to arrest our civilization's descent.
We should not be taking steps backwards and making that sort of behaviour acceptable, because if we do that at home - then places with already lower standards will compete by lowering theirs further.
Geographically it’s a huge country so really would benefit from having factories scattered around the country/NAFTAland. Even if some of them clustered in a preferential region (lumber in Canada, car parts in Mexico, certain foodstuff is in California) it offers some risk.
Remember when a fire in a single factory in Japan crippled the semiconductor industry world wide a few years ago?
Growing food in California should be re-thought if you ask me, given the prolonged drought conditions. At some point shipping water to California just doesn't make sense any longer. Instead of shipping the water to California, grow the food where the water is, even if the yields aren't as high. Like you said, a single crop failure in California can wipe out near 100% of the US' food production for certain fruits and vegetables or at least a very very sizable portion of it.
On the far side of these mountains you will find the humid wetlands and the wide rivers of ... Nevada. Perhaps you can try kayaking on Groom Lake someday.
I don't know much about the cartels or violence in Mexico, but that's the first thing I think of when you describe Mexico as low risk.
There is increased cartel risk. I follow a former White House geopolitical analyst after I met him at a conference. Here's his latest talk on Mexico: https://www.youtube.com/watch?v=yilSJg5CMd4
Well, maybe not quite as powerful at predictions as he is at making geopolitical claims.
(He made a bunch of claims in 2009, for the coming decade I'll paraphrase and link to his predictions)
He claimed the middle eastern wars would be withdrawn from and the world would see it as American weakness. That appears to be incorrect from any metric I can find.
He claimed chinas economy would collapse within the decade in 2009. Well, that's not anywhere approaching corret.
He claimed Germany in the same timeframe would ascend to late 1930 levels of political power. I'm not sure how to quantify that, but I sincerely doubt anyone looks at Germany as strongly as they looked in late 1930s.
He predicted Russia would push their western front, but I'm not so sure that was a bold prediction given the russia-georgia war, but he's definitely correct here.
Made a soft prediction of an eastern asia conflict due to Japans collapsing demographics, not correct, but not a strong prediction either.
Concluded by saying we're going to invert into a deflationary economy, which also appears to be very wrong.
I don't know nearly enough to call the guy out by any means, but I do take his word with a lot of hesitancy. I can't think of anyone who speaks as boldly and confidently across such a large domain without feeling the need to evidence their claims.
https://www.businessinsider.com/stratfor-predictions-for-the...
Agreed literally, but post-Ukraine Germany has made an historical shift, for the first time since WWII, to invest seriously in their military and support foreign militaries, and before that, during the Trump administration, they gained much influence and stature as arguably the world leader on human rights.
> He claimed the middle eastern wars would be withdrawn from and the world would see it as American weakness. That appears to be incorrect from any metric I can find.
That actually has been US policy under Obama, Trump and Biden: Trump tried to withdraw from everywhere. Under the Democratic Presidents, the policy has been that the US is less dependent on Middle Eastern oil, the Middle East is consuming not-unlimited US geopolitical power (including military power), and we need to shift geopolitical resources to China while deepening our relationship with NATO.
Obama withdrew from Iraq, made a deal with Iran, and instead of supporting the Saudis he tried to balance them and Iran; he also began the shift of geopolitical resources, including military, to China. Trump withdrew from Iraq and Syria, and undermined various other relationships. Biden pulled out of Afganistan (Middle East adjacent, bordering Iran), explicitly stating the the reasons above (China, etc.) and is shifting more resources to China, and has clearly defined them as 'the pacing threat'.
And many have claimed, including after the two Iraq/Syria pullouts and the Afghan pullout, that America is weaker.
I don't have my thumb on the global pulse of American strength perception so I really can't comment there, but my perception is that people do not perceive America as anything approaching weak with their military.
Also, statistics and drawing dividing lines on Oval Office changes isn't as meaningful as it appears. First, policy takes months or years to develop, and then it's implemented, and then we see the consequences for years or decades after; no president affects policy much on their first day. Second, it needs to be evaluated in context: Obama withdrew combat forces substantially from Iraq, which IIRC was a campaign promise, and then ISIL grew and became a threat and Obama had to deal with them, sending forces back but in a limited fashion - leaving almost all ground combat to the Iraqi and Kurdish militaries. Trump IIRC sent more forces to finish off ISIL and then pulled almost everyone out (causing the resignation in protest of the Secretary of Defense and of the top diplomat for the region). There's a clear message that the US wants to withdraw, which tells Middle East states that the US won't be as much of a force and tells Russia and China that there is room for them to move in.
> people do not perceive America as anything approaching weak with their military
We are talking about America's overall geopolitical power, which depends on far more than the military - 99% of the world isn't fighting a war. The point isn't that the military lacks firepower, but geopolical power is perceived to be lacking - especially the political will and unity to use that power. For example, Russia and China use the Afgan pullout extensively in propaganda, telling people in places like Taiwan that the US wouldn't defend them. The support for Ukraine has changed that substantially, however.
Mexico has a lot of manufacturing already, and a relatively healthy demographic distribution (that is, unlike the US and some other developed countries, they actually have enough young folks to replace the old folks leaving the workforce). I feel like Mexico would have to try very hard to fail at being a manufacturing powerhouse in North America.
As an aside, this is a good reason for the US to really strengthen its relationship with Mexico and try to help Mexico fix its problems; the US is probably going to be even more dependent on Mexican manufacturing in the future when this whole supply chain shuffle shakes out.
Do you mean like returning the former Defense Minister to Mexico before trial? It's so nice that we can "help".
[0]https://www.cbsnews.com/news/salvador-cienfuegos-zepeda-dism...
Again, im no expert on Mexico but from my understanding of the cartel situation Mexico isn't even in the sphere of influence of Mexico.
I don't thing the US would want to put critical supply chains Ina country like Mexico unless they're willing to put troops there to eliminate the cartels, which to be honest would be a terrible idea.
Might be because there's this chunk of Panama/north Columbia that's run by Guerillas and is one of the most dangerous places in existence (https://en.wikipedia.org/wiki/Dari%C3%A9n_Gap)
[1] https://www.nationalgeographic.com/animals/article/north-ame...
I suspect it violates HN guidelines (too snarky?!?!). However, I for one applaud it's pith!
https://www.latimes.com/archives/la-xpm-1995-08-20-mn-36988-...
But this has been heavily protested by environmentalists and natives alike. It might be less controversial to go northeast to Acandí by tunneling under the mountains, which would leave almost all of the forest untouched. Then you could build a long bridge, a coastal highway, or just keep using the ferry.
Plus, there's not even any rail line reaching Panama. The southern terminus of the North American rail infrastructure is Mexico, I think. I doubt trucking everything through Central America would be very cost effective. So you're not only building a new line through 66 miles of some of the most difficult and remote terrain in the world, you're building or refurbishing another ~1500+ miles of rail.
And then you're only reaching Columbia and Venezuela, with the Andes and the Amazon between you and the two biggest markets in South America: Brazil and Argentina.
It would be cool if it happened, but I think it would have to be a regional public works project funded primarily by the U.S. government. Unless Musk is looking for his next challenge (and he can make it pencil out with his Fermi-math voodoo). Maybe the U.S. can sell it to taxpayers as a jobs and economic development program to stem the tide of Central American refugees.
The landscape is wet. You would effectively be building a bridge the whole way. Whilst fighting a guerrilla war, disease and ruining an ecological system in the process.
Does the Panamerican highway not qualify as land-borne transportation?
https://tax.thomsonreuters.com/blog/mexico-as-a-new-capital-...
We are at systemic risk from our reliance on China.
How can freight be more than 100% of total cost? Everything else was zero or negative?
Note that when a person/company/whatever believes this, they tend to take steps that improve that entity's position, but slightly destabilizes the system as a whole. So if enough entities believe that a crash is coming, it can become a self-fulfilling prophecy.
It's interesting to observe, over and over again, how an economy that size will just seize if only one or two players become someone whom everyone wants something from but they want for nothing. Money just pools in their coffers and since they never spend it, it's just gone from the economy. Eventually, people struggle to conduct basic transactions because the amount any individual is holding dips too close to the minimum fractionalization threshold, nobody can afford anything in the market place (except, of course, the one or two players who never spend), and what trade happens happens on a per-unit bartering basis (massively inconvenient given players in different timezones) or not at all.
... fortunately, global-scale economies are far more immune to this effect; with millions more players, millions more categories of good, and far more currency in cycle, such a seizing is basically impossible.
... unless the disparity between median holdings and maximum holdings is proportionately similar to that 200-a-person economy and the few who have all the money can't (or won't) spend it fast enough to keep it in circulation, perhaps...
One (of many) disproofs of the "international trade makes war less likely" theory.
The claim is: if "international trade" then "war less likely".
The example you've proposed is: "Europe couldn't effectively trade with China, and so waged war on China." The issue from the outset is the lack of international trade?
Target is in the position of needing to offer discounts- perhaps painful ones- to clear out inventory that isn't selling, while they have to pay more to bring in what is.
Time will tell, but I'm not optimistic on this account.
Presumably, this was asb opposed to shortages; Target being overstocked is not normal, and is in fact a sign that things are not normal- rather, a sign that supply lines still aren't lining up with demand, but with different causes now than last year.
Odds are we won't see 2020 prices again on many goods, so inflation slowing is the best we can hope for (and better than rising inflation, of course). It is going to take awhile for a new normal to stabilize, though.
8% inflation may not sound great to you if you got a 1% raise last year, but it's pretty fantastic if you got a 15% raise.
I guess I don't quite understand what is happening in this conversation :)
From my perspective, OP explained why the outlook is negative for target and you asked "why wouldn't i [whimsicalism] be optimistic about [lower inflation]?". To which the answer is, "well, you aren't target... you can be optimistic about that, that's prefectly ok, but it's also sort of immaterial to OP's post which was about Target's current situation."
OP wasn't analyzing whimsicalism's financial situation; they were analyze Target's financial situation. It's possible that you should be optimistic and target should be pessimistic.
I'm either wildly misinterpreting the flow of ideas here or your responses just don't make any sense at all. I'm not sure which.
But companies lowering prices because they are not having as much trouble acquiring goods would seem to be a return to normal to me.
That isn't what is happening. Target is offering discounts because people aren't buying what they have in stock, not because their supply costs are going down. If anything, it'll force prices to stay high on other goods as they need to make up the losses elsewhere.
To whit [1]:
"Target set off alarms three weeks ago — its shares tumbled more than 25 percent — after reporting a 52 percent drop in first-quarter net profit. The Minneapolis-based company cited supply-chain pressures and rising expenses, factors that also hurt Walmart and helped spark a broader market sell-off that erased more than 1,100 points from the Dow Jones industrial average.
Target now expects to sell fewer products in its home categories. It continues to see strong sales in high-frequency goods like groceries, household essentials and beauty products, largely reflecting consumer trends away from the U.S. shopping boom at the height of the pandemic. It also revised its second-quarter profit expectations from 5.3 percent to 2 percent, according to a Tuesday news release."
[1]: https://www.washingtonpost.com/business/2022/06/07/target-pr...
Other articles elsewhere have also pointed out the discounts are an effort to purge stale inventory, which lines up with them also cancelling orders from their suppliers.
If they were cutting costs because supply issues were smoothing out, that would be great. Like I said in a sibling comment, it's going to take some time yet before things stabilize to a "new normal".
Inflation is measured across a wide range of goods- a one-time discount on select items isn't going to budge the needle, or a sign of improvement.
What in god's green earth are you talking about?
There were three economic impact payments that went out to almost everyone:
https://home.treasury.gov/policy-issues/coronavirus/assistan...
For people under the income caps, the total disbursed to each adult was 3200, plus additional to parents / guardians for each child.
So, 2 years on to announce that "Free COVID money is over" is extraordinarily disingenuous.
All of COVID seems like a case of impatience.
The fact that the pandemic would last years was kind of obvious by late spring 2020 -- when in the history of humanity have humans ever experienced a pandemic that didn't last for years/decades? (I'm not here to debate masks or whatever public health measures; that's entirely tangential to the point that pandemics don't just go away after a few months.) Pandemics do end. Just not in a few financial quarters.
The same thing is happening with "Transitory Inflation" now. The supply shock IS transitory and things WILL normalize, but only in the same sense that pandemics do eventually end. Shit takes years, not quarters.
I think by 2024-2025 we'll be in this weird state where supply is back to normal but where there have been years of policy aimed at crushing demand.
I'd argue the opposite. We print absolutely insane amounts of money, which is an indirect tax via inflation (and a regressive one at that, since the rich own more inflation-resistant asset classes than the poor, who don't really own any assets). Higher taxes and less money printing would make that hidden tax less hidden, which is good, but the core problem is spending/printing too much, not taxing insufficiently.
Basically manufacturing is at an all time low, and rebooting post-pandemic will be harder with higher wages given how strong the U.S. dollar is. Of course, wage stagnation is finally being corrected so there may be little to control that.
> And so what we need to do is we need to get demand down, give supply a chance to recover and get those to align. So how might we do that? Right now, in the labor market, there are two job openings for every unemployed person. It’s historically high-level. So in principle, and I’m not saying this will be easy to do, in principle, you could moderate demand, reduce demand to the point where job openings move down substantially, and the labor market gets much closer to being in balance. And that would affect … wages would still be moving up at healthy levels. They wouldn’t have to go down, but ultimately they would be at levels that would be consistent with 2% inflation.
I'm curious your thoughts on the intentional efforts are to crush demand, can you elaborate?
Vaccines weren't available until summer 2021, which was unexpectedly early, and still aren't widely available in some parts of the world. No reasonable "definition" puts the end of a pandemic at summer 2020, but "short and temporary" was certainly the messaging in March 2020.
What I'm saying is that in March 2020 (or perhaps April) it was was obvious that the world would not be out of the pandemic for years in the best case scenario, but many people believed things would be back to normal in weeks or perhaps months. Which... just doesn't have any historical precedent and was clearly wishful thinking. I remember expressing this on the phone to family and friends -- that covid would last years -- and no one believed me.
> I'm curious your thoughts on the intentional efforts are to crush demand, can you elaborate?
Central banks change interest rates in order to shift aggregate demand curves. "Curbing inflation" sounds less negative than "destroying demand", but the central tenant of central bank interest rate policy is that the two are causally related to one another.
https://en.wikipedia.org/wiki/Bullwhip_effect
What I really wonder is what should be done about it. Seems like too many efforts to mitigate things could cause a separate whip?
"Inbound container volumes to the US are reverting to pre-pandemic levels"
The direct answer to your question is, yes.
Prices seem higher regardless, which ties into higher fuel and labor costs.
Target Corp. will cut prices, cancel orders and take other steps to cut its bloated inventory, moves that will lower its profit in the current quarter more than executives thought just three weeks ago.
Demand softened for home products, like furniture, that were popular during the height of the pandemic. In addition to presenting a financial cost, a lot of those items are bulky and take up considerable space in stores and warehouses.
"We got more of that product than we want to have, and we think dealing with that head-on by being aggressive now positions us with the right flexibility for the back half of the year," he said.
But it will come at a cost. .
While its excess inventory will be marked down, Target may see its overall price level rise this summer as it grapples with transportation and other costs that are being affected by inflation.
"Price is the last lever that we pull. … But price increases are unavoidable given the inflationary pressures that we've seen in many categories," Fiddelke said.
https://www.startribune.com/target-will-slash-prices-to-get-...
Apparently, it handled the start of the pandemic poorly and couldn't keep anything in stock. Then just as the winter wave started to ease, it bet big that people would continue to stay locked up and bought tons of home improvement things it should have had in stock a year ago.
Personally, my Target runs have gone from every other week to almost never, because it simply doesn't seem to ever have the things I want and need anymore.
This does not end inflation, but tends to exasperate it. The company goes out of business and you now have fewer things in the economy, but the same amount of money. The result is further inflation.
The issue with a retailer going out of business is not the retailer itself, but the manufacturers behind it. Target failing to sell their product reflects large numbers of manufacturers being unable to sell their product.
I’m looking at expensive hard good rights now. Purchases that I’ve been putting off for awhile because I know those prices are going up soon.
I’ve noticed the local “free range fancy chicken eggs” have remained $4 since two years ago but the cheap eggs have gone from a Buck (sometimes 50 cents on sale) to almost the same $4.
I noticed this too and stared buying the free range eggs again (used to get these all the time for my ramen eggs). There's definitely a difference but I don't go through enough eggs or cook them in a way that I typically care (no time to prep ramen and therefor nitamgo anymore).
People in border states have seen this since the start of the pandemic. I remember the first time that the only toilet paper available in Kroger was all Mexican brands.
I suspect that Mexican companies can make more money shipping goods to the U.S. than selling them locally. I also wonder if the demand from the north had made shortages in Mexico worse.
What Trump sank was the US joining the Trans Pacific Partnership.
There weren't that many changes, but he did implement the TPP's intellectual property rules.
> I doubt the lightbulb cartel is still a thing. While oligopolies and monopolies exist, it's not the answer to every inflating article.
An oligopoly doesn't have to also be a cartel, it just has to have few competitors.
I think the GP is complaining about how the US as pretty much allowed any market consolidation short of outright monopoly for a long time, which means a lot of companies have too little competition and therefore too much market power.
You know what people hate more than oligopolies? High prices. Consolidation is not de facto problematic. Unless said consolidation leads to cartel-like behavior or entrenching regulations (which even Adam Smith recognized as a problem and a propensity of elites, I'm not arguing in favor of laissez-faire capitalism), margins will be cyclical in a free market and colluding oligopolies will eventually face new incumbents, because high margins attracts competition and investments.
There are exceptions like markets where cost is prohibitive for new participants, say telecom (hello Rogers-Bell-Telus), but I don't see how that applies to lightbulbs in the 21st century.
And a lot of people are now questioning the wisdom and effectiveness of that approach.
Also a, "that shouldn't come [as] a surprise" response doesn't really address anything in this subthread. I don't think anyone is surprised that was the approach that was taken or its result, they just disagree with it.
You mean you disagree with it, despite there being many markets where less competition doesn't hurt or even benefits the consumer.
Also, addressing the tone or being grammar nazi doesn't add much to discussion.
Isn't the baby-formula fiasco yet another wake-up call?
While we're at it, let's stop burning our food. Growing (and subsidizing) corn for fuel is asinine.
Why wouldn’t it be?
1: https://www.inlineelectric.com/lifespan
But since you brought up this subject, why should I care consumer brands are exercising their pricing power for as long as I have access to the low-margin alternatives? People paying $5 for takeout coffee at Starbucks doesn't affect me in any way. It would affect me if Coke and Starbucks prohibited the existence of competitors or extinguished them, but that isn't the case (for these examples at least, such anti-competitive behaviors do exist) as you have yourself implicitly noted in your comment.
In a sense they do, every Starbucks in existence is a store where a traditional coffee shop cannot be stablished. How many more Starbucks it takes to completely shut other competitors out of the market?
I can only think of a single other dedicated coffee shop near my suburb of Cincinnati, and it's a cat cafe that serves dogshit coffee (or catshit, I suppose, and I'm not referring to the civet). At least they have cute adoptable cats to play with!
socialists in 2022: "evil oligopolies are raising prices unfairly causing inflation"
havent found one that could explain why they didnt "collude" to raise prices in 2008-2019.
whereas its quite clear what caused the high prices was rather insane govt spending caused by socialist policies.
Applies to Amazon too nowadays.
guess its just a coincidence that they chose now to do it. and not 2017
^^ that chart.
also, giving people money directly with stuff like unemployment and stimulus checks is extremely stimulative compared to say building a bridge.
massive supply shocks didnt help either. but they govt knew there was supply shocks and increased demand anyway. despite warnings by democratic economists. (we just found out yellen herself had misgivings about the 1.9T price tag)
The people you’re referring to would not be saying companies are taking advantage of the zeitgeist and raking in bigger profits knowing inflation talks will take all the blame or straw manning like your 2022 line. Gas prices rising so much providing incredible profits is an obvious example of this.
No one in the White House or Senate are socialists. Bernie is like the Nordic model: capitalism + large safety nets + govt programs. The senate has been in republican control or with the useless Dem leaning current situation with too many conservative Dems. Trump’s regime did some of the biggest “socialist policies” spending. It is wild to assert the right pass socialist policies.
2. The minute we started talking about inflation, every company in my life took advantage of it--overnight.
3. I'm with you on the government spending. I understood the money thrown at Covid, but that's done, and the working poor will never see those checks ever again. And I'm no fan of the Infrastructure Bill.
4. If you don't wonder why gasoline prices fluctuate by a dollar hourly at some stations, while making record profits; I don't know what to say.
5. Every large company made record profits during Covid, and we don't know why? They didn't lower prices.
Again the $300 extra per week for unemployed people affected by Covid was a one time thing. Companies might get free money as usual, but not the little guys.
It was conservatives (Trumpy) that passed first 2 trillion stimulious package.
America has just a few badly run "socialist" programs.
I think we all have seen our homeless population get bigger each month.
Oh yea, federal government programs. Basically (Cal-fresh, and medi-cal)have gone back to make qualifying very hard.
This just might be the “new normal”. The lack of readily available products might be a problem, but there’s also a good chance we see much higher wages across the board
The leading edge of millennials are already way out of their best reproduction years. Middle's very much iffy. The youngest are OK but will be starting to enter that "your risk of complications and birth defects are increasing a ton year over year" territory soon.
And cheat on Capital?
Globally, it's a bit different, the bulge of millennials is in fact larger by all measures, but that bulge isn't really driven by the US or Europe, it's the Middle East, and to a lesser extent, East Asia.
https://www.populationpyramid.net/united-states-of-america/2...
https://www.populationpyramid.net/world/2021/
https://www.populationpyramid.net/united-states-of-america/1...
Vehicles and automobiles – $306.7 billion. Global supply chain issues have GREATLY reduced imports (availability of vehicles, while increasing prices).
Machinery (including computers and hardware) – $386.4 billion. Chip shortage has greatly reduced both that category and categories the depend on chips (autos aside as previously mentioned).
Aerospace – $139.1 billion. Airlines continue to struggle, now due to staffing challenges that find them cutting flights. FAA oversight has stalled Boeing production on 777X and possibly other models, cutting imports necessary to build these aircraft.
Gems and precious metals – $60.8 billion. Massive asset price increase and expectations that cannot continue has greatly reduced speculative demand.
Boeing has stalled their own production by kneecapping their own Quality apparatus. The oversight is a given part. Don't blame the guy whose there to tell you you're doing it wrong.
"Inbound container volumes to the US are reverting to pre-pandemic levels"
The news is: supply chain is evening out and returning to previous norms.
But such honest would certainly be less click-worthy.
Yes[1].
It's basically a choice if you will first buy necessities like meat (+80% price increase), butter (+50%), wheat flour (+100%), pasta(+100%), sunflower oil (+500%), or asparagus (-11%).
Nothing quite like seeing Rapsöl (that's canola oil for North Americans) marketed as an artisanal product, for 5-6 EUR in little half liter dark bottles to preserve the nutty aroma, instead of clear plastic liter bottles for 1 EUR.
Meat is "only" about 20% more than I was used to paying - though that's a side-effect of buying non-caged/free-range which was already way more expensive than the cheap stuff. Eggs are also about 20% more, but again, free-range.
As a single IT guy with a reasonably good salary, I didn't notice much of the price increases - but I do notice when stuff becomes harder to get.
For people on typical German IT/engineering wages, there's nothing approaching a problem getting enough to eat, or even a varied and balanced diet, but don't plan an evening around a particular recipe you don't already have all the ingredients to!
Things are dicier for people like the old lady who looked to be on the verge of tears staring at artisanal canola oil in place of the 1 EUR/liter stuff she was used to buying.
I'm glad I reacted to the glut of cheap strawberries from Greece this early spring by buying a couple of kilos and making jam out of them. Already stocked up my canning ingredients for wild plum season. I have a feeling there will not be short trees full of overripe fruit this year, though.
It frustrates the shit out of me that grocery stores will move product to fill in empty space rather than make it obvious something is sold out, mainly because they don't move/remove price tags. As a result, items sit over the price tag for another product and it causes confusion.
Customers don't read the small print indicating what the price tag is for, just what the price says on it. So, for example, if they're out of the 50-count Advil bottles, they'll fill in the empty space with 200-count bottles that normally sit next to them. Except now, you have 200-count bottles sitting over the 50-count price tag, and customers will expect the 50-count price.
I work in the grocery industry. Shelf facings are set centrally by category managers and, although store management does have some discretion, if staff is willy nilly moving items just to cover up out-of-stocks that's absolutely against the rules. Not that this fact helps anyone, I guess.
I'd definitely complain to management if you see that kind of behavior.
> Inbound container volumes to the US are reverting to pre-pandemic levels
Does not sound too drastic.
How would that even be possible? The U.S. had very little manufacturing know-how leftover even before COVID, and now that's coupled with one of the most serious pandemics in history, political and economic turmoil if not chaos, and supply chain issues. How would a domestic manufacturing industry rise out of this? Where would people get the chips to build out the manufacturing?
Of course, maybe it did ramp up (?), but I would be wholly surprised.
Our factories are much more productive than they used to be, so may require fewer workers, and they've not been growing as fast as e.g. services and finance, but we still have plenty.
IOW we should be way more capable of rapid expansion of industrial capacity than 1941 America was, and 1941 America did a pretty damn good job of it over the following few years (months, even).
We do also have a lot more domestic demand than then, for multiple reasons, but again, modern factories are way more productive per worker than a factory in 1941.
What could lag is specifically high tech manufacturing. A car factory or aluminum plant is one thing. A chip fab is another. That kind of extremely-high-capital-cost ultra-specialized manufacturing, we probably should have been forcing to be at least partly on-shore for security reasons, even if it caused higher prices.
How much more productive are we? US employment in manufacturing peaked, in absolute numbers of workers, in 1979. In 2009, we produced about 50% more than in 1979, despite being well on our way to dropping to 1941 levels of people-in-manufacturing (sheer count, not percentage of pop) by that time.
My point with the comparison to 1941 is that we should have plenty of expertise around to increase production at a rate similar to the increases in the 6-12 months after Pearl Harbor, if we really needed to. IOW, at least a 50% increase inside a year, or probably about double our 1979 domestic manufacturing output (total, after the increase), and 1979 was solidly in the "the US is a manufacturing titan" phase of US history.
Again, however, certain specialized high-tech manufacturing might be an exception (chip fabs, for example). Supply of raw materials might also become a problem. Ability to build or restore/refit normal, industrial factories is not a place I'd expect us to be lacking in know-how, though, because we still do tons of manufacturing.
Manufacturing in the US has imo been surprisingly resilient, and when it comes to components it's remarkably easy to order just about anything from a US supplier, perhaps electronics being the exception.
Europe only retains its place because of low labor costs in Eastern Europe. Western Europe is in real trouble after years of policy push for "Services Based" economies.
I'm not sure where this narrative comes from because Western Europe is still industrialized, in particular compared to the US[1].
the industrial belt roughly from the UK midlands through northern France, Benelux, Switzerland, the Rhine-Ruhr area and South West Germany, Northern Italy and to some extent Spain is one of the most productive industrial regions in the world. [2]
[1]https://en.wikipedia.org/wiki/List_of_countries_by_GDP_secto...
I'm not European, but I have been living in Scandinavia for the last 4 years. I think I overgeneralized based on what I've seen here.
When I said "very little", I of course meant relatively speaking. In my experience in buying industrial equipment, very little of it is made in the U.S. aside from things that would be prohibitively expensive (like heavy equipment) or things simply assembled in the U.S.
And in hearing conversations internal to companies that do have manufacturing, the general sentiment has been "not only can we not afford to make this in the U.S., we simply can't make it".
You say this like it's a minor thing. In fact practically any product of real value in 2022 has to include advanced electronics. What this means is that the US manufacturing capacity is, with a few exceptions, based on legacy products that have for some reason being difficult to offshore (I imagine big household appliances, etc).
What do you mean by this?
Corporations are posting record profits all while raising prices. It's greed pure and simple.
The pain of the lower classes in society trickles up to higher classes as they constrict their spending, default on loans, etc.
In demand and highly compensated engineers may find themselves jobless and struggling if the economic pain carries on for too long.
- Decreased consumer savings - Decreased foreign savings
Plugged into the profit equation: https://www.levyforecast.com/assets/Profits.pdf
US corporate profits should be shooting back up
Of course, it depends on the course of earnings, where current estimates seem quite optimistic
“Those are significant drops”
It’s going to be hilarious when you kids see a REAL recession.
had this discussion with my friend just last night when he tried blaming our current market on our current administration.
our ecomony was _heavily_ propped up by the fed during the pandemic. the market needed to correct itself eventually once the propping stopped.
The West coast Port Workers Association contract is being renegotiated and if I was a savvy buyer I would stock up inventory before and after the negotiation window instead of having my inventory stuck on a boat in the Bay Area. This obviously isn’t the whole answer, but a possible contributing cause.
Also there has not been a lot of coverage on this considering how big of a deal a strike would be if they could not come to terms. The most recent article was about 4 weeks ago according to a cursory google news search.
https://www.reuters.com/business/retail-consumer/us-importer...
in which case maybe the Fed shouldn't raise rates as aggressively?
Or maybe there's not enough to really infer anything from this?
This does not sound like a problem.
This happens at the same time when China and their trading partners are looking to decouple from USD holdings, afraid of the threats made by the US. Don't be fooled, this is the beginning of a realignment where commodity exporting nations will start to privilege Asian countries and reduce their exposure to US/EU nations that will spend several years mired on stagflation.
In the past, countries had no other option than to continue using dollars. Nowadays there is a growing group of nations willing to trade in other currencies.
There's lots wrong with the dollar (or even the Euro), but... the alternatives aren't so great either.
US Inflation Rate (currently 8.3%) : https://tradingeconomics.com/united-states/inflation-cpi
Chinese Inflation Rate (currently 2.1%): https://tradingeconomics.com/united-states/inflation-cpi
I'll grant CPI is not necessarily apples to apples because how companies compose their weightings tends to vary heavily, but it seems like the most reasonable figure to look at that I can think of?
https://www.cnbc.com/2022/04/12/china-inflation-makes-it-har...
US bond yields: https://tradingeconomics.com/united-states/government-bond-y...
Chinese bond yields: https://tradingeconomics.com/china/government-bond-yield
A note on their UI, the button to increase the scale is micro-sized and at the bottom of the graph. It can be easy to miss. But in any case, there seems to be little to no correlation.
You can directly compare the 2 currencies against each other.
https://www.xe.com/currencycharts/?from=USD&to=RUB&view=1Y
Russia is having significant domestic inflation (at about 18% currently), yet the ruble is currently the worlds best performing currency and stronger than it's been in years relative to the dollar.
If you look at charts of consumer spending, the pandemic caused an explosion in spending on goods, while spending on services "dropped off a cliff". Now stuff is going back down to pre-pandemic levels. What are services doing? Climbing back to pre-pandemic levels: https://www.statista.com/chart/23574/consumer-spending-on-go...
Obviously, we "should" be about two years of growth higher than pre-pandemic levels, and I'm not saying the economy is 100% fine and dandy, but this article needs to be understood as being about a sector of the economy, not the economy as a whole.
I guess the benefit, if there is one, is that expensive ICE cars make electric cars look less crazy-expensive than they did before.
A friend went shopping for new/reasonable car, and the Toyota dealer told them “See you in a few years!”