Aurelia Butler

BERLIN (Reuters) -Germany’s new coalition government will pass a supplementary budget on Monday to enable more public investments in the shift towards a greener and more digitalized economy, sources told Reuters on Thursday.The coalition parties agreed to channel more than 60 billion euros ($67.73 billion) of unused debt in this year’s federal budget into a climate and transformation fund, three people familiar with the matter told Reuters on condition of anonymity.The debt-financed injection means that Berlin will now make nearly full use of the 240 billion euro debt ceiling originally granted by its parliament for 2021, the sources added.A finance ministry spokesman declined to comment.Depending on how much additional debt was needed to finance pandemic emergency measures in November and December, the new government could end up parking up to 80 billion euros in the climate fund for future investments, one of the sources said.The government has taken up less debt than projected so far this year as tax revenues developed better than expected and fewer companies asked for pandemic emergency aid over the summer. From January to October, the federal government borrowed less than 150 billion euros on the markets.The budget manoeuvre, as agreed by the centre-left Social Democrats, the pro-spending Greens and the libertarian Free Democrats (FDP) in their coalition deal, allows the parties to make the most of the suspension of Germany’s debt brake prompted by the pandemic this year and next by beefing up the climate fund.The coalition wants to deploy the funds to make critical public investments in climate protection measures – from charging points for electric vehicles to better insulating homes – and the digitalization of Europe’s largest economy.The new government agreed to use an emergency clause in the constitution for a third year in a row in 2022 to suspend strict debt limits and enable new borrowing of up to 100 billion euros. This will come on top of unprecedented net new debt of 130 billion euros in 2020 and nearly 240 billion euros in 2021.From 2023 onwards, the new ruling coalition wants to return to the “debt brake” rule of the constitution that limits new borrowing to a tiny fraction of economic output. ($1 = 0.8859 euros) More

WASHINGTON (Reuters) -U.S. Trade Representative Katherine Tai said negotiations about a free-trade agreement with Britain launched by her predecessor had been paused, but the two allies continue to work “very closely” on challenges such as non-market economic pressures and the global COVID-19 pandemic.Tai told an event hosted by the U.S. Chamber of Commerce that the two allies had “a lot of accomplishments to claim over the course of this year” including joint work on supply chain issues and digital principles, and ensuring enforcement of bans on the use of forced labor.”We will continue to build on this relationship,” she said.Tai and Commerce Secretary Gina Raimondo met this week with British trade minister Anne-Marie Trevelyan, who has raised the prospect of new retaliatory measures unless progress is made on removing U.S. tariffs on steel and aluminum.Britain, which exited the European Union on Jan. 31, 2020, is keen to join a U.S.-EU pact https://www.reuters.com/world/us-eu-expected-announce-deal-ending-steel-aluminum-tariff-dispute-sources-say-2021-10-30 struck in October that allows duty-free entry for “limited volumes” of EU-produced metals into the United States, while retaining U.S. “Section 232″ tariffs of 25% on steel and 10% on aluminum more broadly. UK officials say British firms will face increased pressure from Jan. 1, when tariffs on EU goods drop as a result of the US-EU deal. The EU dropped retaliatory tariffs against the United States after the EU deal with Washington.Tai told the Chamber event said Washington was still recalibrating ties with Britain after its split from the EU, but the allies shared valued, systems and language.”You know, maybe we all have this experience in life. When you have friends who are couples and they split up right? You have to realign your relationships a little bit,” she said.She added that she wanted to respect the “highly specific” dynamics around Brexit.Tai said U.S.-EU agreements on aircraft subsidies and steel and aluminum over the past year had removed or averted the imposition of over $20 billion in tariffs.”We have taken significant steps to transform the nature of the tone of our relationship with Europe,” she said, adding, “And … we’ve done it without stepping back or being soft on defending our economic rights.”Tai said there was more work to do on support for the two blocs’ respective aircraft industries and protecting their markets from unfair trade, but the new framework would allow them to better manage issues going forward. More

OTTAWA (Reuters) – Canada hopes more immigration can boost economic growth and allay a worsening post-pandemic labor shortage, but new migrants could pour gasoline on that red-hot housing market that the central bank has warned was stoked by “a sudden influx of investors.”Prime Minister Justin Trudeau’s administration is on track to meet this year’s goal of 401,000 new permanent residents and is set to revise up next year’s target of 411,000, a government source said.Canada’s successive governments have relied on immigration to drive economic growth in the face of a declining fertility rate, which hit a record low last year. With the pandemic triggering early retirements among aging Canadians, attracting immigrants has grown more important. Also, the country targets high-skilled immigrants who tend bring in money and earn enough to compete for desirable housing.”Canada needs immigration to create jobs and drive our economic recovery,” Immigration Minister Sean Fraser told Reuters. “It’s not just that one in three Canadian businesses are owned by an immigrant, but also that newcomers are helping to tackle labor shortages.” Housing costs have surged due largely to low interest rates and a supply shortage. Migration was another factor, especially pre-pandemic. Now that most borders are open again, more newcomers are likely.Housing prices have helped stoked inflation to its highest in 18 years. Government plans to mitigate housing costs will take time to put in place, and some measures may further strengthen demand, economists say.”It is a conundrum,” said Stephen Brown, senior Canada economist at Capital Economics, said of the effect of immigration on housing costs. Still, ongoing construction and the need for labor justify more immigration. Canada has reached a point where the labor force will “flatline” without immigration, Brown said.Job vacancies in Canada have doubled so far this year, official data shows. The association of Canadian Manufacturers & Exporters is asking the government to double its target for economic class immigrants by 2030 because of worker shortage in manufacturing.The benchmark home price is up 77.2% since November 2015, when Trudeau took power. His government plans to present a housing package to the parliament, including a C$4 billion ($3.2 billion) fund for the country’s largest cities to accelerate housing plans.According to Statistics Canada, immigrants tend to buy in large urban centers, like greater Toronto and Vancouver, where home prices are now above C$1.12 million. Nationwide, a typical home now costs C$762,500 ($600,299), realtor data shows. The value of a typical home in the United States is $312,728, according to Zillow.Rapid price gains are set to slow next year, though analysts polled by Reuters still see Canadian home prices rising 5.0% in 2022, making them less affordable.The aim of the government fund is to create 100,000 new “middle-class” homes by 2024-25 and the cash will go to municipalities that show they can speed up construction.Economists say this measure could be helpful, but they do not like some other measures in the housing package because they would increase demand even more.Prior to the pandemic, the Peel region – part of the Greater Toronto Area – was welcoming some 45,000 newcomers each year, but that stopped during the pandemic because of border closures, said real estate broker Jodi Gilmour.     “Right now we are seeing a rush of buyers trying to beat the two things that are going to change their position going into 2022, which are rising interest rates and competition from immigrants,” she said.($1 = 1.2702 Canadian dollars) More

We’re almost at the end of Year One of the Brexit experiment, which started on January 1 following the last-minute signing of the EU-UK Trade and Cooperation Agreement (TCA). Remarkable to think that this time last year, it was still not yet fully agreed.Even if the “reasonable worst-case” scenarios of 7,000 trucks backing up at Dover never materialised (a rare example of deft expectation management and strategic comms from this government), it has still been a bumpy year for UK exporters compared with peer countries.In truth, there was plenty of disruption behind the scenes in January, but much of it was pushed back into the distribution centres, warehouses and parcel depots where hauliers were waiting to get the correct paperwork to set off on their journeys.Compliance levels at the border surprised UK officials, with only 2 per cent of trucks being turned away by mid-February, thanks to a combination of awareness campaigns (remember the Kent access permit?) and the fact that it was actually impossible to board a ferry to the EU without pre-declaring consignments via the French “SI Brexit” system.To get the green light to board a ferry, you needed to show that your forms — customs, health certificates etc — were in order. That meant that, after the first couple of months, only manageable numbers of vehicles needed to be pulled aside for checks on the EU side of the Channel. In short, it all worked surprisingly well. But what will have evaded the notice of much of the general public is that it worked in only one direction — for UK goods heading into Europe. For stuff coming the other way there was no requirement to pre-declare. Indeed, customs declarations could be deferred for up to 175 days.That all changes on January 1 2022. Barring a last-minute change of heart from the government, hauliers delivering goods from the EU into GB will need to pre-declare their consignments via the UK equivalent of “SI Brexit”, the “GVMS”, or goods vehicle movement service.Customs declarations can no longer be deferred, and products of plants and animal origin also need to be pre-notified in the “Import of products, animals, food and feed system” (IPAFFS) system — though they won’t need a full export health certificate (for which you need a vet to sign off) until July. This means that, to some extent, compared with the “big bang” of full checks from day one that we saw on the UK-to-EU routes last January, the new EU-to-UK system is being phased in more gently.But still, to get that green light to board the ferry in Calais, EU exporters sending food products will first need to complete IPAFFS forms, to generate a reference number in order to complete customs forms, which can then be used to obtain a GVMS code. As Shane Brennan of the Cold Chain Federation puts it: “The government gives the impression that the IPAFFS requirement is a ‘soft launch’ — but it’s not very soft if you can’t do customs or get a GVMS code without one.”So will it all go as (relatively) smoothly as last time? The truth is that nobody honestly knows, because the operation of the system will rely on drivers and exporters from 27 different countries getting their heads around the new system.In practice, a lot of this will be handled by agents, but Brennan reckons that there are still likely to be a fair number of EU food exporters and hauliers “playing catch-up” after January 1 next year. Looking at it optimistically, given that 85 per cent of lorry drivers on the Short Straits are EU drivers, and they have been using “SI Brexit” for a year going the opposite way, they ought — in theory — to be able to manage GVMS. They may also find, given the UK government’s self-professed desire to prioritise flow, that if things do get sticky in the initial months, the British authorities will be more flexible than their continental counterparts, based on the approach to Brexit borders thus far.When the top mandarins appeared in front of the public accounts committee last month they appeared quietly confident that preparations had been sufficient. Jim Harra, the permanent secretary at HM Revenue & Customs, said the fact that businesses were already filling in customs forms, albeit with 175-day deferrals available to them, meant that HMRC was “confident that traders are ready”.He was less certain about EU hauliers, acknowledging that the “greatest risk” came from EU drivers that didn’t realise what they needed to do, though HMRC said it was writing to 14,000 EU haulage groups monthly to gee them up.Harra was broadly confident. He said he reckoned there were “greater levels of readiness” in the EU than we saw in January 2021 for trucks moving the other way, but still, he says “we will undoubtedly see some lorries turned away, at least initially”.The other major unknown is how far the newly imposed hassles of trading with the UK will depress the appetite of EU business to trade with the UK, particularly smaller businesses which — on both sides of the Channel — have less capacity to cope with new paperwork.Another thing to watch for in 2022 is the ending of an easement on rules of origin that will require traders to have underlying information to prove that their goods are sufficiently “made in UK” or “made in EU” in order to qualify for zero-tariff access under the TCA.Businesses will continue to self-declare that their goods do qualify, but anecdotally there’s pretty strong evidence that some smaller businesses aren’t really up to speed on what is a highly complex area.Britain after Brexit has spoken this week with several UK traders who — despite getting letters and emails from HMRC — are still full of questions and uncertainties about this area, which leaves importers with the liability for paying tariffs on any goods wrongly imported duty free.That means that a shoe shop in Bristol, say, that imports shoes from the EU which came in tariff-free (but actually were imported from Asia and shipped onwards, so didn’t qualify) may find themselves paying a nasty retrospective bill. The owner of that shop is already pondering, if that happens, whether they have the lawyers, the cash and the watertight contracts that will enable them to reclaim those losses from their EU supplier. All this adds to the stress of doing business, even if it never happens.Again, we shall have to see how proactive HMRC is checking that declarations are substantive, but it will also cut the other way — UK companies that export to the EU will have angry EU customers on their hands if they’re unable to prove their goods qualified for zero-tariff access if challenged by EU customs authorities. All of which is to say that in some ways, Brexit was really only “half done” in 2021, and the second instalment, even if it has rather lesser billing in the media, will still give businesses that trade with Europe plenty to think about in 2022.Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting — or even benefiting — you and your business? Please keep your feedback coming to [email protected] in numbersChristmas is approaching and yet the discussion over Northern Ireland rumbles on without any obvious prospect of a resolution, at least on the issues surrounding customs and agrifood checks.The EU has signalled that it will press ahead unilaterally with a legal patch to guarantee equal access to medicines, even if the British won’t join hands with it on this.EU insiders say that, despite the de facto extension of grace periods by both sides to ease the burdens of the disputed Northern Ireland Protocol, the pharmaceutical industry wants legal certainty so the European Commission seems determined to push this particular file over the line before Christmas.What the new year brings is very much less certain, as political pressure builds in Northern Ireland ahead of local elections in May. Lord David Frost — having been sent to seek a mutually agreeable deal — will at some point need to make a determination on whether that has proved possible.The government routinely talks about triggering the Article 16 safeguards clause as a last resort, but polling this week (see chart) raised interesting questions about whether that was really more of a priority in Westminster than in the region itself. Analysing the new data, Katy Hayward of Queen’s University Belfast made several interesting points in a blog post co-authored with David Phinnemore for the UK in a Changing Europe think-tank.It was notable that the poll found that 52 per cent in Northern Ireland think the protocol is on balance a “good thing” for the region, up 9 per cent since June, which is perhaps linked to the region experiencing less shortages, particularly fuel shortages, than Britain this summer. And yet by contrast, as Hayward writes, a majority of MPs polled see the protocol as, on balance, a “bad thing” for Northern Ireland.This is a potentially instructive gulf in opinion, particularly when allied to the fact that 87 per cent of respondents in Northern Ireland “distrust or strongly distrust the UK government” handling of the protocol, compared with 44 per cent who distrust the European Commission.If Frost wants to trigger Article 16, and risk a full-blown confrontation with Brussels, Berlin and Dublin, the danger is that it will look like a highly partial act that doesn’t have the support of those who would be most affected. Indeed, only 39 per cent of respondents to the weighted LucidTalk poll considered that using Article 16 would be justified.As Hayward observes: “The fact that the opinion of MPs is so out of line with those of voters in Northern Ireland is of concern given that the future of the protocol is so much in the hands of the UK government. What the prime minister and Lord Frost decide to do — particularly over the triggering of Article 16 — will have huge and direct ramifications for Northern Ireland, economically, politically and socially.”More unmissable Brexit storiesThe US has overtaken the EU as the leading destination for UK financial services exports, according to a report by TheCityUK, a lobby group for the sector. Brooke Masters, meanwhile, wrote this week that the rivalry between the London and Amsterdam stock exchanges missed the point — Europe is being left in the dust by the US and the Chinese and Hong Kong markets in equity trading, corporate bond issuance and pretty much every other metric that matters.The UK is planning to give industry an extra two years to implement a new post-Brexit safety regime for chemicals. The move is the latest in a series of delays to implementing post-Brexit plans, many of which duplicate existing EU safety regimes, as I reported this week.The British government must put down the megaphone and pick up the telephone to start building a new relationship with Europe that can be the basis of a strong Global Britain, argue former UK ambassador to Washington, Nato and Israel David Manning and Jonathan Powell, chief of staff to Tony Blair from 1995 to 2007.Can the EU’s €300bn Global Gateway infrastructure investment project launched last week rival China’s Belt and Road Initiative? Martin Sandbu believes it can but says the EU must clearly articulate the benefits for partner countries. For now, he says, “it looks like a list of unrelated building sites”. More

Back in 2014, US political scientist Francis Fukuyama described an ideal of “getting to Denmark”. Denmark denoted not so much a place, he said, but a symbol that all countries may aspire to. Liberal, democratic, peaceful, prosperous and uncorrupt. Since then the world has hurtled in the opposite direction.Americans have become profoundly sceptical about their democracy. Europe, rocked by Brexit, faces an assertive Russia. A “democratic decline”, as measured by US advocacy group Freedom House, was evident last year in countries where nearly 75 per cent of the world’s population lives. China, with its confluence of authoritarianism and effectiveness, embodies an alternative reality. While the west was losing its way on the road to Denmark, China was getting to Dongguan, a city in the Pearl River delta that stands as a symbol of world-leading high-tech manufacturing. In Beijing last month, the Chinese Communist party passed a resolution that paves the way for Xi Jinping, the leader, to stay in office until at least 2028, perhaps longer. Xi’s leadership was described as “the key to the great rejuvenation of the Chinese nation”, a mission he has pledged will be realised by 2049.This move sets up a vision utterly at odds with the post-cold war triumphalism of the west. Viewed from 2021, George W Bush could not have been more misguided when in 2002 he declared, “the great struggles of the 20th century between liberty and totalitarianism ended with a decisive victory for the forces of freedom and a single model for national success”.An opposite scenario is now unfolding. China under Xi is centralising authority, limiting freedoms in the mainland and Hong Kong, running concentration camps in Xinjiang, bolstering the country’s nuclear arsenal, threatening Taiwan and reducing free market ties with the US. And yet, according to the IMF, China will dominate the global economy by contributing more than one-fifth of the total increase in the world’s gross domestic product each year until the end of 2026. In addition, China has over the past four decades lifted some 770m people out of poverty. Responding to such success, some in the west predicted China’s collapse. Others saw fatal flaws in its anti-democratic design. Many have questioned the sustainability of its debt-fuelled and resource-heavy economic model. Criticism of Beijing’s human rights record has been unrelenting. But Beijing’s enduring effectiveness demands an understanding of the country on its own terms. Examining the patterns of the Chinese past helps to explain both the resilience of the regime and why there are questions about the direction in which Xi is taking the CCP.Wang Yuhua, associate professor of government at Harvard, has parsed the characteristics of 49 dynasties that ruled China over some 2,000 years. He shows that the greatest threat facing emperors down the ages was not internal strife or foreign wars but the elite families populating the imperial court.Some 76 emperors — more than a quarter of the total 282 since 211 BCE — were toppled, murdered or forced to commit suicide by these elites. So it was crucial for Chinese rulers down the ages to find a way to control and placate the elites. But therein lay a “sovereign’s dilemma”, Wang says. The capacity of the dynasty to get things done depended on enlisting the their support. But when such families grew strong, they could — and often did — turn against the emperor. “In order to maintain their grip on power, Chinese emperors broke the social ties among the elites, which rendered them an incoherent group,” he says. Such a course of action could extend an emperor’s rule and prolong a dynasty — but it also gradually weakened the capacity of the state to get things done. Wang sees parallels with Xi’s China today.Xi’s anti-corruption campaign, which has targeted hundreds of senior officials since its launch in 2012, has helped limit the influence of the powerful “red families” that surround the CCP court. As Xi waits to be anointed as latter-day emperor at the 20th National Congress of the Chinese Communist party next year, he must strike an age-old balance. It will not be Sino-US relations, climate change or even domestic economic growth that weighs heaviest on his mind. His main priority will be to keep Chinese political elites sweet enough to maintain their support but disunited enough to enfeeble their resistance. It is all a long way from [email protected] More

The UK’s economic recovery from coronavirus is expected to withstand the imposition of the government’s “Plan B” restrictions, but the Bank of England is likely to push back raising interest rates, economists have said.With real-time data showing strong levels of spending since the Omicron variant was discovered at the end of November, households appear determined to enjoy the Christmas period even if some sectors, such as inner city hospitality, will be hit by the new work from home rules. The latest data from the Office for National Statistics, alongside evidence that companies and people have learnt to adapt their operations to Covid-19 restrictions, have encouraged economists to think that the impact of Omicron will be nothing like as severe for the UK economy as earlier waves of infection. Under the Plan B measures, the legal requirement to wear face masks has been extended, Covid passports or negative lateral-flow tests introduced for large events and a work from home recommendation brought in from Monday. Allan Monks, UK economist at JPMorgan, said the work from home element of Plan B was the most significant of the measures because “it will prevent some forms of spending from occurring”, but he thought “the economic impact is likely to be small”.Even the requirement to avoid the office should not be too disruptive to economic growth, said Peter Cheese, chief executive of the CIPD, the industry body for human resources’ professionals. “Many businesses and their people have learned how to work remotely at scale and at speed during the pandemic, so will be well placed to respond to this change in guidance,” Cheese said.Contradicting prime minister Boris Johnson’s view that work Christmas parties should go ahead even though people should steer clear of the office, Cheese added: “We’d encourage organisations to follow the spirit of today’s revised guidance and to avoid any in-person end of year parties.”With many Christmas parties already cancelled, at a cost to the hospitality sector, the spending foregone has failed to significantly dent recent economic activity, suggesting the economy will end the year on a high. On Thursday, official real-time data from Chaps, the clearing house automated payment system, showed that credit and debit card purchases in the week ending December 2, were 21 per cent up from pre-pandemic levels and the highest since Covid hit the UK.Separate debit card figures, compiled by Fable Data, showed that household spending recovered strongly in the week ending December 5 to be 10.7 per cent higher than the equivalent week in 2019. Figures from the Bank of America’s own proprietary survey corroborated that the arrival of Omicron seemed “to have had little effect on confidence”. Ahead of the announcement of the Plan B restrictions on Wednesday, Christian Schulz, economist at Citi, said the measures were “likely to prove much less disruptive than a full lockdown, which we continue to think will be avoided”.A few economists and industry groups have struck a more concerned note in response to the government’s plans, with the Trades Union Congress calling for a reintroduction of the furlough scheme for employees and companies hit by the work from home measures. In a somewhat unlikely alliance, the Institute of Economic Affairs, a free market think-tank, warned that Plan B could cost the economy £4bn a month, roughly 2 per cent of gross domestic product. Julian Jessop, economics fellow at the institute, said this would “force the taxpayer to stump up billions more to prevent a new wave of bankruptcies and job losses”.Most economists believe the IEA estimates exaggerate the economic impacts, which fall far short of the 25 per cent drop in GDP in April 2020 due to the onset of the pandemic. Monks at JPMorgan estimated that the hit would be only 0.5 per cent of GDP for December and January following a period of economic strengthening in the autumn. Each subsequent wave of Covid-19 has caused less damage than the last, as the population has adapted to health restrictions, aided by government employee support measures.But the risk that the Omicron wave will be more severe than previous variants, requiring further measures later down the line, is likely to be sufficient to persuade the BoE not to raise interest rates at its meeting next Thursday, economists said. Steffan Ball, UK economist at Goldman Sachs, said he had changed his previous forecast that the BoE would raise rates this month. He believes the central bank’s Monetary Policy Committee would find it difficult to explain an increase just after new restrictions had been imposed.

“We now think risk management considerations will dominate in next week’s MPC deliberations,” said Ball.“We expect the MPC to signal that this is only a short delay to gather more information on Omicron, and indicate that a hike remains appropriate in coming months.”Financial markets agree with this assessment, with a low probability placed on a rate rise next Thursday, and will instead be increased from 0.1 per cent to 0.25 per cent at the following MPC meeting in February.Martin Beck, chief economic adviser to the EY Item Club, said investors’ current prediction that the committee will not increase rates in December looked like “a more reliable bet”. More

We all know how panic buying works. Terrified that your local Tesco is about to shut its doors before you can secure enough toilet paper to get through lockdown, you and others buy reams of the stuff, leaving shelves empty. But what about the impact this has on the toilet roll manufacturers? In most instances, panic buying results in retailers becoming desperate for stock. In their desperation, they then tend to over-order future supplies. Even though demand for toilet paper is — as a function of people multiplied by trips to the bathroom — ultimately little changed. This, in trade circles, is known as the bullwhip effect. The idea is simple: relatively small, and often short-term, changes in consumer demand can lead to profound shifts in the pressure placed on suppliers. How this impacts the global economy is something that Hyun Shin, the Bank for International Settlements’ head of research, talked about earlier today. Shin used the chart below to make a point that we think has been made too seldom over the past couple of years: the world’s makers have done a remarkable job of not only matching pre-pandemic capacity, but raising it.

For Shin, this rise over pre-pandemic levels of semiconductor supply may signal that firms are, in line with the bullwhip effect, ordering too much stock:When taken as a whole, the signs point to strong demand that has outpaced supply capacity that is growing, but not growing fast enough. However, the key question is how much of this stronger demand can be attributed to the bullwhip effect. To what extent will the behavioural responses that gave rise to bottlenecks work in reverse to clear up backlogs once supply chain problems begin to ease? Depending on the answer, we may find that supply bottlenecks may be resolved faster than currently feared, just as they have persisted longer than initially expected.Given that much of the inflation we’re seeing right now is in markets for things like used cars, which are directly affected by chip shortages, if Shin is right, then prices could fall sooner than people think, as automakers can build up stocks of semiconductors and produce more new vehicles. Do we buy this argument? In theory, yes. In practice, the trajectory of the pandemic remains too uncertain to really know to what degree demand for certain products has fundamentally changed. If lockdowns remain the norm during the winter months, it’s plausible that we’ll carry on spending more on consumer durables than we did pre-pandemic. That, in turn, would mean that the world would require more chips, which are used in everything from toys to computers and cars. Usually you’d expect supply capacity to rise to meet this demand. But in the case of chips, foundries were already operating 24/7 as a rule. And building additional capacity, according to McKinsey, can take up to 18 months. In such a scenario, firms might not want to invest more in boosting capacity if, by the time the plants come online, spending patterns have returned to their pre-pandemic norms. Expect more on the theme of chips supplies in the coming days. For now, we’re going to reserve judgment on whether or not we’re about to see supply chains whip back into shape any time soon. More