Economic data reflect the restructuring of global supply chains.
Almost two years have passed since then, Regionalization, nearshoring, reshoringand “friend shoringThe impact of the global supply chain restructuring process is revealed by U.S. and international economic data. As pandemic disruption and policy uncertainty accelerate supply chain change, previously reliable and common data correlations are changing as well.
Consider US manufacturing.in the meantime technology, Financeand consulting Amid 15 months of monetary tightening by the Federal Reserve, companies announced massive job cuts, but the manufacturing sector remains resilient. In fact, expansionary fiscal policy continues to drive positive growth and inflation, and combined with federal efforts to relocate semiconductor production domestically, has triggered a manufacturing boom and, with it, severe labor shortages.Considering an aging workforce, an economy and culture that for generations have prioritized college education over vocational training, there simply aren’t enough people available. skilled worker — electrician, Welderand semiconductor engineer — to meet demand.
On the other side of the Pacific,remove the risk‘ is creating its own economic ripples among major importers in North America and the Eurozone. Export trade flows are changing, according to a survey of 15,000 vendors at the 2023 Canton Fair in Guangzhou, China. Producers used to take advantage of vertical integration to export large volumes of finished goods to developed countries, but now many manufacturers from Guangzhou to Shanghai move to emerging markets (EM) for final assembly. Fulfills small orders of intermediate products to be “near-shored” to destinations in
Under this new paradigm, exports from the port of Qingdao, a shipping hub for emerging markets, will grow by 16.6% year-on-year in Q1 2023 via the ports of Shanghai and Zhoushan, which serve European and North American routes. The amount of containers used has increased. , decreased by 6.4%. By and large, manufacturing centers in East Asia are dealing with overcapacity, while some US sectors are facing capacity shortages. Such transformations are seldom without cost.
The once consolidated “factory gate pricing” is also changing geographically.
Global supply chain optimization and vertical integration across major manufacturing hubs in Asia over the past decades have contributed Promoted coordination between data. But these relationships hinge on whether pre-pandemic supply chains are currently in disarray.
Data correlations between U.S. inflation and manufacturing base prices may weaken as assembly of finished goods becomes more widely distributed across emerging regions and supply chain restructuring continues. why? This is because as supply chains become more diffuse and less integrated, the idiosyncrasies of local labor and materials lock in factory prices in each country.
With these factors in mind, a geographically redundant but less efficient trading system is likely to cause inflation, as the new weighted average PPI reflects a range of non-optimized price data. Alternatively, the cost of energy, raw materials and other commodities may serve as leading indicators for a more complex but resilient global supply network.
US CPI and Bloomberg Commodity Index
Source: U.S. Bureau of Labor Statistics, Bloomberg, Kekselias, Inc.
Supply chain transformation = uncertainty
Given the current policy and business focus on supply chain redundancy, there is likely to be more diversification rather than consolidation and cost optimization in the coming weeks and months. I have. Therefore, the structure of world trade will continue to change until a new equilibrium is reached. This means increased data volatility, weakening relationships with once-correlated peers and, perhaps most importantly, for investors who understand and anticipate new supply chain paradigms and data synergies. It signifies the arrival of new opportunities.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect those of the CFA Institute or the author’s employer.
Image credit: ©Getty Images / Natee Meepian
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