Something seems very different in the global economy right now. Export volumes are up but global supply chains are still a mess. From the Financial Times Alphaville:
After slumping in dramatic fashion during the second quarter of 2020, export volumes have since soared to the extent that, by September, they were above levels seen before pandemic began to impact the global economy and are now at an all-time high.
Yet how can this be the case when at the same time we read daily of global supply chain snafus from shuttered Chinese ports and seemingly chronic shortages of semiconductor chips?
On the face of it, it seems perplexing that we’re heralding an export boom at the same time as economists in manufacturing powerhouses such as Germany are warning the problems with sourcing parts are weighing on the GDP numbers.
[…]
According to the OECD, Australia’s exports increased 10 per cent between the first and second quarter. Brazilian exports shot up by 29.4 per cent. Russian exports grew by a whopping 30.7 per cent.
What do those countries have in common? They are all major commodities exporters benefitting from a triple whammy of “increasing prices, limited global supply and strong demand.â€
Growth in exports from manufacturing powerhouses, meanwhile, has been more staid. Germany, for instance, only saw export growth of 1.3 per cent, while in China volumes shrank by 2.5 per cent.
It seems paradoxical to me. Are finished goods exports a lagging indicator? What’s going on?
I have read that the bottleneck is at the ports and truck transport due to labor shortage.
Yes, I have heard much the same thing. It’s not that there are no goods but that there aren’t enough drivers to move the goods.
I’m surprised that the trucking issue is surprising. Its been around for quite some time and is real as a heart attack. Our businesses experience it; talk to people in logistics and they will tell you.
But the issue has a number of facets. There is of course the container shortage issue for transport from Asia. This may be due to a prior run down in stocks and a catch up. As I noted a few days ago, many Taiwanese businesses are busy moving out due to fears of a China takeover. You can’t really produce when you are moving.
But production issues exist in the US as well. We purchased an entire house full of furniture – all from US furniture manufacturers – and were given a June delivery. We currently have received only about 20%. Labor and parts availability, particularly foam, are the reasons given. People forget, if you have a bill of materials 10-30 line items long it only takes one to halt shipping of the final product.
Mining or harvesting, and shipping by boat minerals, food or other raw/commodity materials can prop up export statistics, but still limit final product availability.
One last thought, going to the dark side. Do you think China might be holding back, just to mess with the west. They are at war with us; we just don’t know it.