Good morning from London, where shortages of workers and goods in several areas have become a big concern for many businesses despite strong demand as the economy continues to rebound. The twin combination of Brexit and the pandemic has not been kind to UK plc, it’s fair to say.
Others, such as exporters of consumer goods and goods’ components that have been in demand during the pandemic, have been more fortunate. Today, we use fresh data to show how, even with supply shortages and shipping bottlenecks, some manufacturers have been able to thrive.
Trade in bikes, chips and chairs continues to surge
With much of the world shut, consumers have directed their spending to products perfect for working (or, indeed, exercising) from home. Makers of sporting goods, office furniture and electronic goods have seen demand rocket.
Most services are domestic, while the bulk of goods bought by consumers in advanced economies are imported. Meaning this trend should be good for trade. Yet the world’s makers have also had to contend with factory closures, supply chain blockages and other pandemic-related dislocations.
We were fortunate enough last week to sit down with a team from Trade Data Monitor, a database used by policymakers and trade organisations to track trade trends, which gave us plenty of fresh evidence about how these pros and cons balance out.
The chart below, which compares the opening four months of this year with the same period in 2019, shows manufacturers of electrical machinery — a category that includes products such as televisions, electronic circuits and electric motors — have seen the value of exports surge beyond the $1tn mark.
The value of trade in cars is still down, but imports of semiconductor chips, used in everything from laptops to car seat belts, are up.
At the onset of the pandemic, demand for these chips increased on the back of demand for electronic equipment, such as laptops and iPads, that arose due to the shift from offices and schools to remote working and distance learning. As car manufacturers reopened during the second half of last year, these chipmakers struggled to meet demand. Some factories in places such as China and Taiwan have suffered from fresh Covid-19 outbreaks this year among their workforce, forcing them to shut off production lines.
Yet the value of exports is still up. In the first four months of this year, the trade in semiconductors had risen 21 per cent over the same period in 2019. An increasing share of those exports originate from China, which in the first four months of 2021 accounted for a third of revenues.
This is not just a case of chipmakers jacking up their prices. The number of photosensitive semiconductor devices exported was up 20 per cent compared with the first four months in 2019.
A similar story can be told in the market for sporting goods and bicycles. With many people unable to go to gyms, imports of sports equipment, toys and games in the first four months of this year were up 35 per cent in value terms compared with the same period in 2019. Among the countries that report figures in units, the number of tennis rackets exported had risen 11 per cent and the number of bicycles shipped around the world was up 88 per cent over the same period.
The value of imports of furniture and other homeware goods rose 14 per cent over the same period. The number of swivel chairs with height adjustment, often bought for homeworking, was up 50 per cent and the number of other goods for home decoration, such as tufted carpets rose 10 per cent, Trade Data Monitor showed. Again, that’s in spite of furniture manufacturers being hit hard from factory closures and logistics bottlenecks.
How do the figures influence our thinking about the macro picture on world trade? We know that global trade volume has been rising steadily since its drop in May last year, surpassing pre-pandemic levels at the end of the year and continuing to rise throughout 2021.
But much of the more recent uplift has been attributed to rising demand for commodities. While that will no doubt have helped, the figures from Trade Data Monitor suggest the makers of consumer goods and their components have played a role too.
We’d expect them to continue to contribute in the coming quarters, with businesses already experiencing rising order backlogs. Françoise Huang, economist at the credit insurance company Euler Hermes, forecast global trade would grow 8 per cent in volume terms in 2021 and 16 per cent in value terms because of “exceptionally low levels of inventories” in many advanced countries.
What happens beyond this year depends on how long you think the pandemic will last. Jack Allen-Reynolds, economist at Capital Economics, expected supply chain disruptions to ease in 2022 “as consumption patterns return to something like normal”.
“That would mean demand for electronic goods, and therefore semiconductors, declining and demand for services continuing to recover, helping to alleviate some of the most intense supply problems,” he said.
As much as we like to promote trade, we hope that he’s right and by then lockdowns are a thing of the past.
Trade links
Supply chain woes continue to cause chaos. The boss of APM Terminals took the highly unusual step of suggesting consumers needed to reduce demand for his ports’ services by stopping buying so much stuff.
Morten Engelstoft, chief executive of the operator, labelled it a “vicious circle” of surging demand and logistics bottlenecks. Furniture retailers are the latest part of the economy struggling to meet demand for their wares. Meanwhile, there’s more bad news for automakers, with the chief of Japanese chipmaker Renesas saying he expects Covid outbreaks to continue to cause disruption for some time yet.
Honda Motor has found one fix (Nikkei, $, subscription required). It will start making electric vehicles for the North American market using more than half of the same parts as General Motors, as environmental and supply chain pressures force a realignment in the auto industry. Japan’s influential business lobby, Keidanren, has proposed (Nikkei, $) exempting fully vaccinated travellers from the country’s mandatory 14-day quarantine, with Japanese companies becoming increasingly scared that they risk falling behind Singapore. Chinese investment is flowing into (Nikkei, $) Guinea’s Simandou hills, which are said to hold the world’s largest untapped iron ore reserves, as it seeks to reduce dependence on Australian mining exports. Claire Jones and Francesca Ragalado
Source: Economy - ft.com
