Hello from London, where planes fly over our heads to take delegates from around the world to Glasgow and make commitments to stem climate change.

Today we take another look at the supply chain. Just when you thought things couldn’t get worse, measurements of delivery times from global suppliers in the manufacturing sector fell to a new low in a survey in October, according to the closely watched IHS Markit global survey. The investigation started in the late 1980s, so it’s something. But what we want to emphasize here is kind of a positive – that things should have been a lot worse.

Supply chain stress also reflects high demand

The supply chain issues we are seeing right now are bad news. They threaten the global economic recovery, not only because they limit the production capacity of companies, but also because they generate inflationary pressures, effectively impoverishing consumers.

Yet there is one part of the story that is largely missing: the fact that we are producing and trading more than ever.

The reason: a shift in demand from spending on services to purchasing durable consumer goods during the pandemic. The real story, as Neil Shearing, chief economist at Capital Economics, says, “is how well the supply chain has held up given the huge shift from demand to goods.”

Today we want to show you exactly how much we produce and trade using new business data that the analysts at Container Trades Statistics have kindly shared with us.

More than 80 percent of exports, in terms of volume, arrive at their destination via container ships. So we’ll start by looking at what happened to the volumes, measured using twenty-foot containers.

In the 12 months to September, more than 14 million containers over twenty feet – or their equivalents (most containers are 40 feet) – crossed our oceans compared to the same time last year. This year’s figure is up around 10 million compared to the same period in 2019.

The average monthly figures for global freight transport even reached a new high of 15 million in the 12 months leading up to September.

It is not a small increase; each container can carry up to 22 tonnes of goods. “The pace of post-pandemic industrial expansion has been unprecedented,” said Alexandra Hermann, economist at Oxford Economics.

Manufacturers in a hurry, meanwhile, increased global volumes of international air freight. In September, freight tonne-kilometers, a measure of freight traffic calculated by multiplying the tonne of freight by the distance traveled in kilometers, increased 9.4% from the same month in 2019, according to figures from the ‘Iata.

Although it is still much more expensive to take goods by air, soaring shipping prices have made air travel more affordable. In September, the average price of air freight transport was three times that of sea transport, compared to 12.5 times before the crisis.

It makes sense that during shutdowns when many services were shut down, trading volumes exploded. But why do we still buy so many products when gyms, recreation centers and restaurants have reopened in most countries?

The answer is that the expected normalization of consumer spending habits has yet to happen. In September, the real value of US consumer spending on services was still lower than in the same month in 2019. In contrast, spending on durable goods, such as furniture, and non-durable goods, such as food, increased. increased by 19% and 14% respectively.

In most major economies, visits to bars, restaurants and entertainment centers remain below pre-pandemic levels, according to Google Mobility Data. The use of public transport and trips to workplaces have also not returned to ‘normal’ in most countries, despite the easing of most restrictions related to Covid-19.

The result is that in October, the share of EU businesses reporting lack of demand as a factor limiting production fell to its lowest level since the launch of the EU business survey in 1985. At the same time, the number of months guaranteed by open orders – a measure of how well order books are filled – increased to an all time high.

This means that even if consumers come back to spend on services rather than goods, it would take some time for companies to fill their shelves.

The stocks are so low, Shearing told us, that “you get to the point where the shortages can feed each other.” This happened in the UK, for example, where a shortage of truck drivers sparked a fuel crisis.

“We don’t see a complete mitigation of the disruption until the second half of 2022,” Hermann said. While she expected some of the strains on production capacity to naturally ease as consumers spend more on services, the limits to expanding manufacturing capacity and the carrier fleet. containers remain “key constraints”.

Commercial links

Good news in supply chains. Automobile and clothing factories are come back to life (Nikkei, $, subscription required) in Vietnam and Malaysia as Covid cases fall in Southeast Asia. Bad news in supply chains. from Mexico once booming automotive industry is to find difficult to Due to shortage of chips.

This Twitter feed points out that in many cases the supply chain snags Start with cheaper parts. The latest edition of Bloomberg’s Odd Lots podcast leans over why the wood price, after soaring, fell like, uh, wood.

Mining company BHP intended to focus its future portfolio on minerals with a decarbonisation “upside potential” such as copper and nickel, noted Managing Director Mike Henry (Nikkei, $) at the Nikkei Management Forum.

The Financial Times has a good reading on families and friends delighted to see the reopening of the travel corridor between the United States and Europe. Francesca Regalado and Claire Jones