Stagflation-ary
Economic activity decelerated in early August, flash PMIs out Monday suggested, underscoring what, by now, it's fair to call a ubiquitous "peak growth" narrative.
IHS Markit's composite gauge for the US dropped to 55.4, the lowest since December. The new orders gauge similarly fell to an eight-month nadir, while the employment index fell to 51.1, barely in expansion territory and the lowest in more than a year.
"The expansion slowed sharply again in August as the spread of the Delta variant le
Enterprises dependent on cheap labor will shut down as well, releasing their workers to ventures that can afford to pay $15 an hour.
Interesting article in NYT this morning about Catrike, a recumbent tricycle manufacturer with five hundred bikes sitting unsold in a workshop while it waits for a missing critical part, a $30 derailleur made in Taiwan. “We’re sitting on $2 million in inventory for one $30 part,” Mark Egeland, the company’s general manager, said. According to the Times, Egeland thinks it could take 12 to 18 months to sort out issues across Catrike’s suppliers, and he doesn’t think the firm will ever return to the kind of lean manufacturing process — carrying limited inventory — that it used to use.
Bet a lot of domestic manufacturers are thinking the same thing — or should be. So add “peak global supply chain” to “peak oil” and “peak growth” as trends to keep an eye on over the next three, five, ten years.
https://www.nytimes.com/2021/08/23/business/economy/supply-chain-bottlenecks-coronavirus-inflation.html
The derailleur is located in the lowest stress portion of the drivetrain. For a few thousand dollars, the manufacturer could set up a 3D printer to manufacture the parts. Sitting helplessly on $2m in inventory just demonstrates the manufacturer’s lack of resourcefulness. Maybe the takeaway from the story is that engineering and additive manufacturing are about to see a boom. Or we can all sit around licking our butts and pine for days gone by. https://www.ge.com/additive/additive-manufacturing
I was trying to touch up some kitchen chairs for my parents last week. I went to Ace hardware and I ended up purchasing my third choice of paint types because the first/second choices were out of stock. Not only were the base color paints in short supply, my Ace Hardware Man told me they can’t restock the powder color tints. I asked him if I should try Lowes and he said, “Even Sherwin Williams can’t get paint or color tint”.
Then I went to the paint brush aisle for a 1/4 inch paintbrush. Out of stock.
Yeah, love the Cartrike article, where there is one cock roach there will be others would seem to apply in this idea that how much production is being held up by a single or a few parts. To the extent the supply side won’t normalize it would seem wise to not to continue to stock the demand side with additional fiscal and monetary easing. Obviously the Fed is debating this but is also quite aware of Delta and negative economic momentum seen in CESIUSD