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Producer Prices Surge. Germany, China, other Countries Are Now Exporting Inflation, Adding to US Inflation Pressures

April 26, 2021

Producer Prices Surge. Germany, China, other Countries Are Now Exporting Inflation, Adding to US Inflation Pressures

Central banks still brush it off as just “temporary.”

Producer prices of German industrial products in March rose by 0.9% from February, after having risen by 0.7% in February from January, and after having spiked by 1.4% in January from December, the biggest month-to-month jump since 2008.

Compared to March last year, producer prices jumped by 3.7%, according to the German Federal Statistics Office (Destatis), the biggest year-over-year jump since November 2011. The surge began last fall, after sharp declines earlier in the year:

Part of what caused the 3.7% increase from March last year — but not the surge over the past few months — is the “base effect“, since in February and March last year the producer price index was declining, and the latest year-over-year results are measured from those low points.

But factory prices have been rising on a month by month basis for the seventh straight months — with large increases over the past three months. And that has nothing to do with the base effect.

Prices of intermediate goods jumped by 5.7% year over year in March, the fastest since July 2011, due mainly to sharp rises in the price of secondary raw material (47%) and prepared feed for farm animals (16%). There were also increases in durable consumer goods (1.4%) and energy (8%), which in large part were driven by a sharp increase in electricity prices (9.6%).

Producer prices are now rising fast in the major manufacturing economies.

In China input costs rose 4.4% in March from a year earlier up from a 1.7% increase in February. It was the sharpest rise since July 2018. As the world’s biggest exporter, China’s rising prices stoke inflation around the world.

…click on the above link to read the rest of the article…

Supply chain slowdown hits at key pillars of economy and will likely get worse: Dan Yergin

April 18, 2021

Supply chain slowdown hits at key pillars of economy and will likely get worse: Dan Yergin

KEY POINTS

The pressures on supply chains are increasing and global disruptions are likely to only get worse as summer approaches and the economy booms.
Disruptions have converged at the same time in three important pillars of the global economy – shipping, computer chips, and plastics.
Port backups are described as the worst ever and delivery times are the longest in 20 years of data collection.
The system will ultimately adjust, but that will take time and requires new investment in ports and capacity.

Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, April 7, 2021. Lucy Nicholson | Reuters

If you’re wondering why your new couch is going to take three or four months to arrive, not just a few weeks, the reason is simple: You are at the very end of a global supply chain that has buckled.

For similar reasons, GM and Ford and other automakers around the world are slowing down manufacturing, temporarily shutting auto plants, and furloughing workers.

A recovering world economy that depends upon the synchronized, smooth running of global supply chains is now being slammed by what has turned out to be synchronized disruptions.

Although the massive Ever Given container ship has been unstuck from the Suez Canal, its continuing impact is only adding to the woes.

As government stimulus seeks to fuel a hyper recovery and the world economy accelerates over the rest of this year, the pressures on supply chains are increasing and disruptions are likely to grow as we head into summer.

Stretching supply chains

…click on the above link to read the rest of the article…

“Things Are Out Of Control”: Supply Chain Collapse Leads To Lumber Frenzy, Soaring Home Prices

April 14, 2021

“Things Are Out Of Control”: Supply Chain Collapse Leads To Lumber Frenzy, Soaring Home Prices

With median prices for both existing and new homes at all time highs, and soaring at a record annualized rate of almost 20%…

… increasingly more Americans find themselves priced out of homeownership, while still cautious banks refuse to lend them the mortgages they so desperately need to live the American Dream (on credit).

And unfortunately, since most US houses are made out of wood, we have even more bad news: home prices are about to get even more expensive if for no other reason than the frenzy sweeping the lumber market is set to keep going through the summer peak of US home building as labor shortages and depleted inventories mean that supplies can’t keep up with skyrocketing demand.

As Bloomberg summarizes what we have observed across the past few months of torrid, sometimes panicked, ISM Survey Responses such as this one…

“Things are now out of control. Everything is a mess, and we are seeing wide-scale shortages.”

… there is an unprecedented shortage and tightness across the entire timber supply chain. Sawmills have had trouble ramping up fast enough to meet the surge in demand. Meanwhile, trucking delays and worker shortages at lumber yards have added to costs, which are now getting passed on to consumers. Worst of all, the bigger cost component of any new house l Lumber prices – have surged more than 60% to record highs this year, and analysts aren’t expecting any relief until late 2021, if not later.

That, according to Bloomberg, will keep pouring fuel on red-hot home prices, making ownership less affordable for large swathes of the population (one would almost think it was the Fed’s plan to destroy the middle class)…

…click on the above link to read the rest of the article…

Where’s Dirk Gently When You Need Him?

April 5, 2021

Where’s Dirk Gently When You Need Him?

Did you hear? A supersized cargo ship got wedged in the Suez Canal on March 23rd? If you didn’t, you must do pretty well at avoiding the news, social media, and late night TV. But the short of it is: the Ever Given somehow lost control (sandstorm strength winds have been blamed, as have human errors) and crashed into the bank of the canal and lodged itself in.

So what? Is this really news? Or just a sensational story to distract us from the pandemic, which, one might argue, is itself a distraction from the rapid unraveling of Earth’s systems and thus human civilization? Perhaps. But then again perhaps not.

Here’s why this incident is worth understanding:

First, a ship single-bowedly disrupted global trade for six days. It was finally freed on March 29th. However, there is now a backlog of over 300 ships while many ships rerouted around the Cape of Good Hope. The Suez Canal is part of a trade route that carries more than 10 percent of global trade, including 7 percent of the world’s oil. Each day 30 percent of the world’s shipping container freight moves through the canal. Thus it created backlogs in shipping (including some 200,000 live animals who could have overheated or run out of food). It raised the price of oil briefly. It created shortages in factories—not just of parts but of shipping containers. And of course, it felt like a freak occurrence. Last year, of the 18,840 ships that moved through the canal, there were no incidents.

But the main reason is because this is an excellent metaphor on how fragile our entire globalized system has become.

…click on the above link to read the rest of the article…

Erik Assadourian, suez canal, supply chains, trade, shortages, globalisation, gaianism, shipping

Suez Highlights the Fragility of Globalization

April 4, 2021

Suez Highlights the Fragility of Globalization

Photo: Suez Canal Authority.

The global supply chain is an elaborately choreographed ballet, nowhere more than in the flow of containers through which 60% of the world’s seaborne trade travels. Calibrating a stream of over 800 million boxes each year entails sophisticated tracking that makes sure containers reach their destination. The system reaches down to the crane operator who stacks each box in a specified position on the ship, and ensures enough empty boxes are on site to load the next shipment.

Last week the ballet turned into a mosh pit, when a character named MV Ever Given stepped out of its choreographed role to disrupt the entire dance. It blocked the world’s most critical trade chokepoint, the Suez Canal, an artery carrying 30% of the world’s container traffic. Effects radiated across the planet. Oil prices ticked upwards. Ships were held up at major ports from Rotterdam to Newark. Store and e-commerce deliveries were delayed. Both Amazon and Ikea had shipments on the Ever Given itself.

In our just-in-time world, where ships act as precisely scheduled floating warehouses, a week’s interruption creates a backlog that lasts a lot longer. It may only take days to relieve the maritime traffic jam and restore normal canal operations. But leading container shippers predict it could take weeks or even months to sort it all out, as off-schedule ships pile into congested ports. The shipping industry was already struggling with impacts of the pandemic on operations and the way it has shifted consumer purchases from restaurants and entertainment to consumer goods. Containers were short in Asia where much shipping emerges, and costs were way up. Then the canal blockage piled on. It is “going to result in one of the biggest disruptions to global trade in recent years,” reported MSC, the world’s second leading container shipper.

…click on the above link to read the rest of the article…

PATRICK MAZZA, counterpunch, supply chains, globalisation, suez canal,

Food Crisis of 2021 in Europe

April 1, 2021

Food Crisis of 2021 in Europe

We are staring in the face of a serious food crisis in Europe as food prices rise continuously, and with further draconian COVID measures within the EU, they are bringing the food supply chains to a standstill. Our models have been warned that this 8.6-year cyclical wave into 2024 will be one of commodity inflation due to SHORTAGES rather than speculative demand. All the indications that the world is heading for a serious food price crisis are in play. The Food Price Index (FFPI) of the Food and Agriculture Organization of the United Nations (FAO) averaged 107.5 points in December 2020, an increase of 2.3 points (2.2%) compared to November 2020, which represents an increase for the seventh consecutive month.

With the exception of sugar, all sub-indices of the FFPI recorded slight gains in December, with the sub-index for vegetable oil again rising the most, followed by that for dairy products, meat, and cereals. For 2020 as a whole, the FFPI averaged 97.9 points, a three-year high, 2.9 points (3.1%) higher than in 2019, but still well below its 2011 high of 131.9 points. It is also interesting that the FFPI in 2002 was still 53.1 points. It only increased significantly from the financial crisis of 2007/08, only to then level off in the 90-point range. Since May 2020 it has increased by 18%.

Our models project that the upward trend in the FFPI will intensify going into 2024. With the coronavirus mutating, as we warned ALL viruses do, as such, we have these various strains from Africa, Brazil, UK, and even California, are inspiring politicians to use this as an opportunity to restrict the population even further. These corona measures have extended to the food supply chains, disrupting them just as we see in electronics…

…click on the above link to read the rest of the article…

armstrong economics, food, food crisis, europe, martin armstrong, food price inflation, food shortages, supply chains,

Brace, Brace, Brace: Global Supply Chains, Instability and Archegos

March 29, 2021

Brace, Brace, Brace: Global Supply Chains, Instability and Archegos

You could not make this up; an unimaginably complex WW3 Techno-thriller unfolding as markets stumble and global supply chains hover on the edge of anarchy. On the other hand, maybe that’s just the way it was planned.

“The supreme art of war is to subdue the enemy without fighting.”

This morning – You could not make this up; an unimaginably complex WW3 Techno-thriller unfolding as markets stumble and global supply chains hover on the edge of anarchy. On the other hand, maybe that’s just the way it was planned.

I am not one for conspiracy theories. But… this morning… If I was a writer of trashy global-techno-World War 3 pulp fiction, and proposed the following scenario where the global economy lurches into an unprecedented period of instability – nobody would believe me:

1) Global Supply Chains, weakened and struggling after a year of global pandemic, plus a growing shortage of microchips holding back multiple industrial sectors, are plunged into new crisis by a puff of wind causing a box-ship to skite sideways and block the Suez Canal, trapping East-West Trade.

2) Unstable and over-priced Global Markets are spooked into a frenzy late on a quiet Friday night by the largest margin calls ever ($20 bln plus) as an Asian “family office” dumps billions of dollars of stock into the market. Collateral damage spreads, as other financial firms, (inevitably including Credit Suisse (Switzerland’s very own Deutsche Bank), and Nomura), announce material losses.

3) As global central banks struggle to restore real growth, while trying to hold interest rates low and support commerce, and acutely conscious of how a market crash could crush global confidence – things suddenly get more difficult as confidence in equity valuations takes a massive knock.

…click on the above link to read the rest of the article…

bill blain, morning porridge, supply chains, supply chain disruptions, risk

Blocked Suez Canal Adding to Container Shortages, Supply Chain Snarls, Component Shortages for Manufacturers

March 27, 2021

Blocked Suez Canal Adding to Container Shortages, Supply Chain Snarls, Component Shortages for Manufacturers

Exactly at the worst possible time. Ripple effects to be felt for months.

Today is Thursday, and the Suez Canal is still blocked by one of the largest container carriers in the world. The last thing the tangled up and strained supply chains needed amid a historic surge in demand for durable goods, and component shortages that have led to numerous shutdowns of assembly plants, was a traffic jam at both ends of one of the world’s most important shipping choke points. But that’s what manufacturers were served up when the Ever Given got stuck in a narrow part of the Suez Canal where about 30% of the world’s ocean container volume transits. Image by Airbus Space, this morning:

The Ever Given in all its beauty. Owned by Japan’s Shoei Kisen, operated by Taiwan-based Evergreen Group, and registered in Panama, it has a capacity of 20,000 TEU or Twenty-foot Equivalent Units.

On Tuesday at around 7:45 a.m. local time (Monday night in the US), the Ever Given got stuck in high winds, sailing northbound through the Suez Canal on its way from China to Rotterdam. And it is still stuck, despite all-out efforts to refloat the ship, blocking traffic in both directions. The estimates as when it could be moved out of the way range all over the place, from days to weeks, and might have to include partially unloading the ship.

About 19,300 vessels passed through the Suez Canal in the fiscal year 2020, or roughly 52 per day, according to the Suez Canal Authority. And they’re now piling up at both ends of the canal, and are stuck in the Great Bitter Lake in the middle.

…click on the above link to read the rest of the article…

Suez Canal Crisis Morphs Into Global Supply Chain Wrecking Ball

March 26, 2021

Suez Canal Crisis Morphs Into Global Supply Chain Wrecking Ball

The world got another wake-up call this week about the overreliance on complex global supply chains. As of Friday, the massive containership, “Ever Given,” remains stuck in the canal, unable to be refloated, paralyzing the world’s most important shipping lane.

Ever Given is one of the world’s largest containerships, with approximately 20,000 shipping containers of goods. The shipping lane is a vital linkage between Asian factories and customers in Europe and the US.

Reuters reports the Suez Canal Authority (SCA) is looking forward to cooperating with the US to refloat the stranded containership that has blocked the canal since Tuesday.

“The Suez Canal Authority (SCA) values the offer of the United States of America to contribute to these efforts, and looks forward to cooperating with the US in this regard,” it said in a statement.

Shoei Kisen, the Japanese owner of the ship blocking the Suez Canal, aims to dislodge the vessel from the canal bank by Saturday. But as Bloomberg reports, the process to refloat the ship could “take until at least next Wednesday.”

Peter Berdowski, CEO of Dutch company Boskalis who has been tasked with dislodging the vessel, warned Ever Given “could be stuck in the canal for weeks.”

So actual timelines on when the vessel will be unstuck are unclear. The blockage is wreaking havoc across global supply chains, and crude prices were higher on Friday morning on mounting fears the containership will be stuck for much longer than initially anticipated. Since the containership got stuck on Tuesday, crude prices have been chopping around 57-handle to 61-handle.

…click on the above link to read the rest of the article…

suez canal, shipping, supply chains, zerohedge,

Texas Freeze Creates Global Plastics Shortage

March 24, 2021

Texas Freeze Creates Global Plastics Shortage

First, it was a demand slump across pretty much every manufacturing industry because of the pandemic. Then a surge in demand for electronics caused a shortage of microchips, which hit the automotive industry particularly hard. Now, the Texas Freeze has caused a global shortage of plastics. The Wall Street Journal reported this week that the cold spell that shut down oil fields and refineries in Texas is still affecting operations, with several petrochemical plants on the Gulf Coast remaining closed a month after the end of the crisis. This creates a shortage of essential raw materials for a range of industries, from car making to medical consumables and even house building.

The WSJ report mentions carmakers Honda and Toyota as two companies that would need to start cutting output because of the plastics shortage, which came on top of an already pressing shortage of microchips. Ford, meanwhile, is cutting shifts because of the chip shortage and building some models only partially. GM, on the other hand, has started building some pickup trucks without a fuel management module because of the shortages, which will affect the fuel economy performance of these cars.

Yet, the automaking industry is just one victim of the abnormal circumstances on the planet and the Gulf Coast. Another is the construction industry. The WSJ reports, citing industry insiders, that following the petrochemical shutdowns, builders are bracing for shortages of everything from siding to insulation.

More than 60 percent of polyvinyl chloride (PVC) production capacity in the United States is still out of operation a month after the Texas Freeze, Bloomberg reported earlier this month….

…click on the above link to read the rest of the article…

“Get Ready For Some Serious Sticker Shock Very Soon: This Jump In Inflation Won’t Be Transient”

March 23, 2021

“Get Ready For Some Serious Sticker Shock Very Soon: This Jump In Inflation Won’t Be Transient”

Semiconductor Costs Could Lead to a Shock This Fall

Consumer confidence is key to how people plan to spend. You can see it in the chart below. And as the chip shortage grows, expect the higher prices to begin showing up in products, which could dampen confidence and eventually stall consumer spending.

The recent surge in chip prices hasn’t affected consumers, and stimulus has kept spending up while confidence has lagged. But that will soon change. Manufacturers have been eating the increase costs and not passing them on to consumers. With chip prices expected to rise every quarter this year, many companies will be unable to keep swallowing it, especially those with tight margins.

Manufacturers order semiconductors six months in advance. The choke points along the supply chain driving up prices and creating shortages will come to a head in the third quarter, when the next orders to replace inventories are delivered, according to the founder of SouthBay Research Andrew Zatlin.

Automakers will struggle to hold the line. At General Motors, for example, roughly 5% of the cost of goods sold is from semiconductors. The company has 11% margins, and a surge in chip prices will hit profits hard, according to Zatlin. And small business who sell to the likes of Amazon and Walmart with tight retail margins will be forced to raise prices even higher.

The impact should only spread from there. Which is why this jump in inflation won’t be transient as the Fed hopes. Every manufacturer with tight margins will be forced to raise and maintain higher prices. So get ready for some serious sticker shock very soon.

Bloomberg Markets Live , Vincent Cignarella, zerohedge, inflation, supply shortages, supply chains, price inflation

“Things Are Out Of Control” – There Is A Shortage Of Everything And Prices Are Soaring: What Happens Next

March 19, 2021

“Things Are Out Of Control” – There Is A Shortage Of Everything And Prices Are Soaring: What Happens Next

In Wednesday’s press conference, Jay Powell confirmed that the Fed is setting off on a historic experiment: welcoming a conflagration of red-hot inflation for an indefinite period of time in an overheating economy, with the underlying assumption that it’s all “transitory” and that inflation will return to normal in a few years, and certainly before 2023 when the Fed’s rates will still be at zero.

There is a big problem with that assumption: while FOMC members, most of whom are independently wealthy and can just charge their Fed card for any day to day purchases of “non-core” CPI basket items, the vast majority of the population does not have the luxury of having someone else pay for their purchases or looking beyond the current period of runaway inflation, which will certainly crush the purchasing power of the American consumer, especially once producers of intermediate goods start hiking prices even more and passing through inflation.

Many readers may not recall, but one such instance of “transitory” inflation that proved to be anything but and led to the infamous Volcker Fed and its double digit rate hikes, was the price of oil which took off in the Arab oil embargo and then refused to come back for over a decade.

The Powell Fed, however, is eager to brush aside any analogues to previous episodes of runaway inflation which it sees as having a demand component, and merely ascribes what is taking place to unprecedented supply chain disruptions – i.e., collapse in supply – as a result of both the trade war with China and, more recently, the covid pandemic, which have unleashed chaos among traditional supply-chain intermediaries.

…click on the above link to read the rest of the article…

Inflation Galore at Manufactures, amid Massive Shifts in Demand, Supply-Chain Snags, Shortages, Lack of Shipping Capacity. And They’re Passing it On

February 2, 2021

Inflation Galore at Manufactures, amid Massive Shifts in Demand, Supply-Chain Snags, Shortages, Lack of Shipping Capacity. And They’re Passing it On

For now, the story is that it’s just temporary.

For now, the story is that the sudden and massive shifts in the economy in 2020 have caused shortages and distortions in the goods-producing sectors and in shipping and trucking, as consumer spending has shifted from services – such as flying somewhere for vacation and spending oodles of money on lodging and restaurants and theme parks – to goods, particularly durable goods.

The story is that prices are rising because components and commodities are in short supply, and supply chains are dogged by production issues, and are facing transportation constraints, as demand for those goods has suddenly surged. And that all this is temporary.

And the Fed has said it will ignore inflation for a while, that it will allow it to overshoot, and only when it overshoots persistently for some unknown amount of time and becomes “unwelcome” inflation – “unwelcome” for the Fed – that it will try to tamp down on it.

Meanwhile, inflation pressures are building up. Two reports out today show a large-scale surge in price pressures for manufacturers – and they’re able to pass them on to their customers.

The Prices Index “surged dramatically in January” to a level of 82.1%, after an eight-month upward trajectory, the highest since April 2011, “indicating continued supplier pricing power,” said the Manufacturing ISM Report On Business.

In the ISM data, a value above 50 means expansion, and a value below 50 means contraction. The higher the value is above 50, the faster the expansion. January saw the fastest expansion of the Prices Index since April 2011 (data via YCharts):

…click on the above link to read the rest of the article…

Grocery Stores Have Started Limiting Toilet Paper and Wipes Purchases

November 13, 2020

Grocery Stores Have Started Limiting Toilet Paper and Wipes Purchases

Amid an ongoing surge in COVID-19 cases, grocery stores have begun to limit the amount of toilet paper and disinfecting wipes once again. News reports say this new policy to prevent “hoarding.”

In the last few weeks, we have seen (firsthand in some cases) what happens when an unprepared public prepares all at once. The frenzied rush to grab as many supplies as possible created an unprecedented strain on our “just in time” food system. Basic supplies like water, pasta, bread, milk, meat and cleaning supplies were snatched up as soon as they were restocked. But this initial run on food is just the beginning.

Things are likely to get worse especially if there is any word of another potential lockdown. People will panic buy things once again wiping out entire sections of the grocery store. Luckily (or sadly) in my area, frozen foods are about the only things not in stock. There’s still plenty of fresh fruits, veggies, and canned foods…for now.

But as grocers reinstate these limits, they may understand that the food supply chain is once again breaking, and this time, it might get to the point of chaotic. Since the supply chain “remains challenged” from the first lockdown, stores began putting a limit of one on purchases of larger toilet paper and paper towel sizes and four on smaller toilet paper and paper towel sizes.

At least three companies say supply chains for securing these items are still strained. Around 19% of paper products such as toilet paper and paper towels and 16% of household cleaning products were out of stock during the week ending November 1, according to data from market research firm IRI.

…click on the above link to read the rest of the article…

Food Shortages Hit China: There Is “not…enough fresh food to go around”

October 20, 2020

Food Shortages Hit China: There Is “not…enough fresh food to go around”

Over the past few weeks, I have been writing articles regarding a coming food shortage. I’ve been pointing out that the food shortage is going to hit the United States hard but that it is also going to hit the rest of the world.

A worldwide fit of hysteria over COVID, resulting in the shutdown of the world’s economy, interruption of the supply chain, and the destruction of food products, as well as international trade wars and natural disasters, are going to collide with one another and make this winter one of the toughest on record.

China is publicly acknowledging a coming food shortage.

But while many have dismissed my claims, I’d like to draw your attention to the fact that China is now publicly acknowledging a coming food shortage. (And as noted in this article, when they admit there’s a problem, it’s a BIG problem. ) In fact, China even has an anti-food-wasting campaign going on across the country right this minute encouraging people to eat half portions or at least make sure to finish their plates.

In an October 5, article for the New York Times entitled “China’s mealtime appeal amid food supply worries: Don’t take more than you can eat,” Eva Dou writes,

On the surface, China’s campaign to encourage mealtime thrift has been a cheerful affair, with soldiers, factory workers and schoolchildren shown polishing their plates clean of food.

But behind the drive is a harsh reality. China does not have enough fresh food to go around — and neither does much of the world.

The pandemic and extreme weather have disrupted agricultural supply chains, leaving food prices sharply higher in countries as diverse as Yemen, Sudan, Mexico and South Korea. The United Nations warned in June that the world is on the brink of its worst food crisis in 50 years.

…click on the above link to read the rest of the article…

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