Our view of the global economy must change


By Brendan Murray and Michelle Jamrisko

April 30, 2022, (Bloomberg) — Global supply chains are knitting together from China to Denmark, prompting reconsiderations of things as macro as globalization itself and micro as the efficiency of trucking around US ports.

In terms of the bigger picture, the intertwined global economy has taken decades to come together and will take years to materialize no matter how it evolves. In the meantime, economists are squinting to see the more granular, short-term shifts the pandemic and Russia’s war in Ukraine are forcing on consumption, investment, production and trade.

Some observers say now is the time to focus on metrics other than traditional measures of jobs, prices and gross domestic product.

“The way we look at the global economy needs to change,” said Steven Barrow, currency strategist at Standard Bank. “We should no longer look at growth, inflation and monetary policy through the prism of demand. Instead, it’s the supply that’s key.

Before the pandemic, the supply of goods and services was what economists generally called “elastic” – flexing easily to match demand. “But now supply has gone from elastic to inelastic, which means the response to changes in demand is much less,” Barrow said in a note.

With that in mind, here are a handful of unorthodox supply-side scopes to browse:


Many economists, including the Bloomberg team, have developed indices or colored heatmaps to show the degree of stress on supply lines. In a research note this week, analysts at BNP Paribas SA released their latest tracker and it showed some April indicators flashing orange and yellow.

They examine traditional gauges such as lead times and order-to-inventory ratios, as well as alternative numbers such as air freight rates and the number of ships anchored outside the Port of Los Angeles. “Disruptions are back and here to stay,” they wrote.

A measure from Moody’s Analytics shows that supply stress in the world’s two largest economies, the United States and China, is still well above the pre-pandemic norm.

Disruption from the Ukraine conflict accentuated those chart lines in February, but now the blame lies primarily with Covid-related woes in China, which forced 15% more ships to wait in the waters off Shanghai ports than ‘this time last year,’ said Steve Cochrane, the company’s chief economist for Asia-Pacific. This reverses the improvement that began in the last quarter of 2021, he added.

harbor patrol

Nearby ports of Los Angeles and Long Beach, which handle about 42% of all US container trade with East Asia, receive many shipments from China. Thus, a poorly monitored indicator of freight fluidity is worth monitoring.

The share of shipping containers staying in ports for more than five days rose last month to 38.7% from 34.3% in February, ending three months of improvement, according to data from the Pacific Merchant Shipping Association. . The figures also showed rail container dwell time increased to 7.7 days from 5.2 days in February. That this continues to deteriorate matters both economically and politically: Improving freight through Southern California ports has been a goal of the Biden administration.

Congestion is also worsening in European ports, which are suffering more than their American counterparts from the disruptions linked to the war in Ukraine. Prohibited Russian cargo must be segregated from other goods and re-routed or stored, which adds labor and uses resources that ultimately hinder shipping capacity. But not all ports provide timely data, so private companies fill the void.

According to FourKites, a Chicago-based supply chain visibility platform, the average dwell time for export containers in European ports was 10.8 days as of April 24, up from 9.2 in mid-February. . For imports, the wait decreased from 6.2 days to 6.5 days.

Winners, losers

Businesses victimized by the rumblings are piling up like shipping containers in locked Shanghai. Apple predicted supply constraints would cost $4 billion to $8 billion in revenue this quarter, joining Microsoft and Texas Instruments on the list of companies whose sales are limited by China’s Covid-19 restrictions.

The 3M senior executive said the strains will continue to pose challenges for the “foreseeable future.” Amazon.com reported that e-commerce sales growth is slowing.

But according to Drewry, a shipping research and consultancy firm in London, not everyone will be a loser in the third year of the global supply chain drama. For the container shipping industry, the windfall in profits could reach $300 billion this year, up from $214 billion in 2021, Drewry said in its latest forecast report. Drewry says he expects global freight rates to rise 39% this year as traffic jams last through the first half of 2023.

It will also create a favorable environment for companies like transport and logistics giant Kuehne + Nagel International.

The Swiss company has developed its own disturbance indicator called Seaexplorer. At its peak in late February, the metric showed around 17 million container dwell days – mostly goods mired in congestion globally. Two or three weeks ago that number had dropped to around 6 million and this week it had risen to around 7.5 million.

“It’s growing day by day and we work and live in a very competitive market environment,” Kuehne + Nagel CEO Detlef Trefzger said in a conference call this week.

© 2022 Bloomberg L.P.


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