Global Macro Monitor

COTD = Chart of the Day

…the largest [new semi fabs] of which are planned in Arizona, New York, Ohio, and Texas—are expected to create jobs and boost domestic production of semiconductors. However, the industry faces challenges in recruiting and retaining talent, particularly engineers and technicians. – McKinsey

We are not fans of industrial policy. Furthermore, we believe U.S. policymakers have a misguided notion of what truly matters in restoring manufacturing. Just ask Tim Cook.

China has moved into very advanced manufacturing, so you find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world. That intersection, which is very rare to find anywhere, that kind of skill, is very important to our business because of the precision and quality level that we like. The thing that most people focus on if they’re a foreigner coming to China is the size of the market, and obviously it’s the biggest market in the world in so many areas. But for us, the number one attraction is the quality of the people. – Tim Cook, Apple CEO

QOTD = Quote of the Day

Never before have a rising power [China] and the established hegemon [U.S]. been so economically intertwined….China holds at least $860bn in US public debt, representing 12 per cent of the foreign owned debt. Trade volume between the US and China measured just about $690bn in 2022 . . .The United States also remains the largest destination for outbound Chinese investment in 2022. – Oriana Skylar Mastro, Upstart: How China BecameA Great Power

Why’d you have to go and make things so complicated? – Avril Lavigne 

Doom Spending

Shoppers are stretched, but discretionary spending isn’t abating as quickly as some finance chiefs and economists expected—a phenomenon economists and finance chiefs have coined “revenge” and even “doom” spending. And it has CFOs across industries—from travel to clothing, restaurants and consumer packaged goods—working to figure out what the impact is on balance sheets.

…The pandemic changed what motivated people to spend. Shoppers emerging from the pandemic with money to burn were eager to splurge, and this so-called revenge spending drove people to Taylor Swift and other concerts and led them to take trips and buy designer handbags. This boosted some companies’ profits as living in the moment took priority over saving for a home or rainy day. – WSJ

Consumers are remixing their spending back into services and entertainment outside of their homes after curtailing those activities during the pandemic..This normalization, combined with the cumulative impact of higher prices on consumer budgets, is resulting in continued soft trends in discretionary categories, most notably in home and hardlines. – Brian Cornell,  Target CEO

Mexico Markets Thumped 

The Mexican governing party’s unexpectedly lopsided victory this week has investors concerned that it may use its mandate to sweep aside some of the checks on presidential power which have long been a source of comfort to the business community.

The possibility that current president Andres Manuel Lopez Obrador could push through some of those changes during his final month in office in September has some investors especially on edge. – Reuters

We warned about the coming wave of inflation in February 2021, when year-on-year CPI inflation was still below 2 percent, at 1.67 percent. We then followed up with this:

Inflation is way too high given exremely easy financial and monetary conditions.  There will be blood…The Democrats should begin to worry. – GMM,  June 11, 2021

Inflation is one of the most insidious and pervasive of all economic indicators, as it affects all Americans, albeit some more than others. We don’t second-guess the economic policy response to the pandemic, but the monetary authorities erred by keeping the liquidity spigot open for too long.

I never really liked this guy, but he seems to be one of the few voices of reason at this crazy moment in history.

To impress upon you the effects of caffeine, I footnote esoteric research conducted in the 1980s by NASA. Their scientists exposed spiders to different drugs and then observed the webs that they constructed.  Those drugs included LSD, speed, marijuana, and caffeine. The results, which speak for themselves, can be observed in the figure [below].  – Matthew Walker,  Why We Sleep

COTD = Chart of the Day

Global goods trade is showing signs of accelerating after last year’s slump, pushing up shipping rates and giving some supply-chain managers flashbacks to the demand spike that disrupted international commerce three years ago…

Some of the catalysts for the monthlong advance in seaborne freight rates stem more from worry than optimism. They include concerns about port congestion in Asia, labor strikes in North America that threaten to hobble ports or rail services, and heightened trade tensions between the US and China…

Ocean shipping began the year already stretched by Red Sea attacks that forced carriers to send their vessels the longer way around southern Africa rather than through the Suez Canal. A.P. Moller-Maersk A/S, the world’s No. 2 container line, has estimated the industry’s capacity loss at 15%-20% this quarter on routes to northern Europe from Asia…

Importers and exporters across Asia, the US and Europe typically see shipments increase from July to September as retailers look to restock before back-to-school, Halloween and year-end holiday sales seasons. That spurt of orders looks to be happening now, analysts said, at a time when spare container capacity is limited.

“This early peak season is packing a major punch,” Stephanie Loomis, head of ocean freight for the Americas at Rhenus Logistics, wrote in a LinkedIn post heading into the US Memorial Day weekend. “In speaking with many carriers this week, the comments were all the same: Vessels are all completely full.”

Spot rates for containers reflect the tightness. The cost for a 40-foot container to the US West Coast from Asia jumped 13.4% to $4,915 in the week ended Sunday, according to Freightos data, the fifth straight weekly advance. That’s triple what it was in late December, but still well below the September 2021 peak of $20,586.

The spot rate for containers to northern Europe from Asia is also climbing, fetching $4,882 last week, more than three times higher than a year ago, according to Freightos. – Bloomberg