Good evening,
There seems little let-up in the supply chain pressures stifling global business.
We report today on how the cost of flying cargo around the world has reached record levels, as companies try and meet soaring demand in the crucial pre-Christmas period.
Container shortages and congestion at ports are still intense. In Los Angeles — the destination for around 40 per cent of Chinese imports — about 75 container ships are waiting to dock, according to logistics group Kuehne+Nagel, with some stuck for weeks.
This has left many businesses with no choice but to shift to air freight, leading to a doubling in prices on key routes connecting Chinese manufacturers to US and European consumers.
The grounding during the pandemic of passenger planes, which in normal times carry half the world’s air cargo, has added to the problem.
The $95bn global toy market is one obvious casualty of the supply chain squeeze, making western companies rethink their reliance on China, which accounts for 80 per cent of global toy exports. With jumps in the costs of energy and raw materials as well as shipping, the country is no longer as cheap a manufacturing base as it once was.
Lego, the world’s biggest toy maker, last week announced an investment of $1bn in a new factory in Vietnam, while France is having some success building up a domestic production base.
But apart from “knee-jerk onshoring”, there is another way to ease the squeeze, reports Alan Beattie in today’s Trade Secrets newsletter: get a better idea of what’s going on.
This year’s disruptions have revealed big holes in data on who is making what, where and when, and how it is getting transported, he writes.
UK logistics company Unipart for example is building a machine-learning product to try and create more agile supply chains. “You can start teaching the system to use data about container usage and locations, port congestion, vehicle movements, driver shortages and raw materials,” says boss John Neill. “You then have far more information to manage and plan delivery lead times than before.”
The only snag, Alan explains, is that some data — such as the routes of Chinese ships — are becoming harder, rather than easier, to plot. (You can sign up for the excellent Trade Secrets newsletter here.)
Latest news
Opec has raised its forecast for world oil demand for the first quarter of 2022 and played down the impact of the Omicron variant (Reuters)
NHS leaders doubt target for Covid boosters in England will be met
Ghana says it will charge airlines $3,500 per unvaccinated passenger flown into the country
For up-to-the-minute news updates, visit our live blog. And if you want to listen to the latest headlines in under three minutes, listen to our Top Stories Today audio digest
Need to know: the economy
It’s a big week for central banks and global monetary policy. G7 finance ministers met today as the UK’s year-long presidency came to an end; the US Federal Reserve meets tomorrow and on Wednesday to discuss its asset-purchase programme and publish new economic and interest rate projections; the European Central Bank is likely to announce a decision on its stimulus programme on Thursday — the same day as the Bank of England’s decision on interest rates.
Unhedged author Rob Armstrong ponders whether markets are right to remain so optimistic in the face of imminent rate rises from the Fed. Spoiler alert: he’s still gloomy. Meanwhile, consumer spending on debit and credit cards in the US surged last month, even as Americans expressed worries about the state of the economy.
Latest for the UK and Europe
European gas futures jumped 10 per cent this morning after new German foreign minister Annalena Baerbock said the Nord Stream 2 pipeline, which would double the capacity of the existing Russia to Europe route, did not comply with EU law.
Turkey’s monetary policy drama intensified as the country’s currency hit a new low, passing the 14 to the dollar threshold, with another interest rate cut expected on Thursday.
Global latest
Higher oil prices and the end of pandemic restrictions have led Saudi Arabia to forecast a budget surplus of $24bn net year, its first since oil prices crashed in 2014. The economy is forecast to grow 7.4 per cent after an expansion of 2.9 per cent this year.
Investors do not have a crystal ball. But they do have the yield curve. And right now in the US, it’s behaving strangely. “You don’t normally see this kind of flattening so early in the recovery,” says one bond manager. If you want to know what this suggests for the future of the US economy and understand what the yield curve actually is, read this new explainer. You can even create some music, using the interactive tool.
Japanese business — at least ahead of the arrival of Omicron — is in a confident mood, according to the Bank of Japan’s quarterly Tankan survey. Sentiment among manufacturers is flat but has leapt in the services industry since the lifting of the Covid-19 state of emergency at the end of September.
Need to know: business
Sir Richard Branson’s Virgin group gave Virgin Atlantic a £400m cash injection, as new coronavirus fears dented confidence in the travel sector. Virgin and other UK airlines called for “disproportionate” passenger testing rules to be scrapped and demanded a new package of government support to prevent “permanent scarring” of the industry. Flight and hotel bookings across the world have taken a serious hit since the arrival of the Omicron variant.
Europe’s ski resorts had hoped this winter would banish memories of the Covid “superspreader” events of spring 2020, but many fear the season could be dented by Omicron. Skiing is responsible for about half of Switzerland’s tourism revenues, accounting for 2.5 per cent of GDP. In Austria, it is worth up to 4 per cent.
Pub chain JD Wetherspoon has warned of the damage from a “lockdown by stealth” after Westminster last week reintroduced certain restrictions to try and halt the spread of Omicron.
The World of Work
Nearly two-thirds of US companies now plan to make vaccines compulsory for their workers. In Europe, where vaccination rates are higher and mandates focus on individuals rather than businesses, the number is lower. President Joe Biden’s plan to make all US businesses with 100 or more employees get vaccinated, or get weekly tests, is currently held up in the courts, but it is still having an influence on companies’ policies, according to the research from the Manpower Group.
The algorithms used by gig economy companies to deploy, monitor and discipline their staff are being questioned by frustrated workers across Europe, writes tech correspondent Madhumita Murgia. One Uber driver commented: “The lower classes, gig workers, self-employed, we are the first to be affected because we are the most vulnerable. But what’s next? What if AI decides if an ambulance is sent to your house or not, would you feel safe without speaking with a human operator? This affects all our lives.”
Get the latest worldwide picture with our vaccine tracker
And finally . . .
Turns out that not even the North Pole is immune from labour shortages. The FT’s Lex column looks at the surging demand for Santas.
Source: Economy - ft.com
