Global freight volumes are much higher than pre-pandemic levels
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Hello from London, the plane flew over our heads and brought representatives from all over the world to Glasgow and made a commitment to curb climate change.
Today we will look at the supply chain again. According to the closely watched global IHS Markit poll, just when you think things will not get worse, the delivery time indicators of global suppliers in the manufacturing industry fell to a new low in the survey in October. This investigation began in the late 1980s, so it is quite important. But what we want to emphasize here is a certain positive factor-things should be worse.
Supply chain pressure also reflects high demand
The supply chain barriers we are now witnessing are bad news. They threaten the global economic rebound, not only because they limit the production capacity of companies, but also because they create inflationary pressures that actually make consumers poorer.
However, part of the story is largely omitted: we produce and trade more than ever.
The reason: during the pandemic, demand shifted from service expenditures to the purchase of consumer durables. As Neil Shearing, chief economist of Capital Economics put it, the real situation “is how the supply chain is performing in light of the huge shift in demand to commodities.”
Today, we want to use the latest company data shared with us by the analyst Container Trades Statistics to show you exactly the number of products we produce and trade.
In terms of volume, more than 80% of exports reach their destinations via container ships. Therefore, we will first look at what happens to the volume measured using a 20-foot container.
In the 12 months to September, more than 14 million 20-foot containers (or equivalent containers (most containers are 40 feet)) crossed our oceans compared to the same period last year. This year’s figure has increased by approximately 10 million over the same period in 2019.
In the 12 months ending in September, the global average monthly freight data even hit a new high of 15 million.
This is not a small increase; each container can hold up to 22 tons of cargo. Alexandra Herman, an economist at the Oxford Economics, said: “The rate of industrial expansion after the pandemic is unprecedented.”
At the same time, manufacturers in a hurry have increased the volume of global international air cargo. According to data from the International Air Transport Association, in September, freight ton-kilometers (a type of freight ton-kilometer multiplied by the number of freight kilometers) increased by 9.4% compared to the same month in 2019.
Although it is still much more expensive to carry cargo by air, soaring freight rates make air travel seem more affordable. In September, the average price of air cargo was three times that of ocean freight, which was 12.5 times lower than the pre-crisis price.
It makes sense that during the lockdown period when many services were shut down, transaction volumes skyrocketed. But when gyms, leisure centers, and restaurants in most countries reopen, why should we buy so many products?
The answer is that the expected normalization of consumer spending habits has not yet occurred. As of September, US consumers’ actual spending on services was still lower than in the same month of 2019. In contrast, spending on durable goods such as furniture and non-durable goods such as food increased by 19% and 14%, respectively.
According to Google Mobile data, visits to bars, restaurants and entertainment centers in most large economies are still below pre-pandemic levels. Although most Covid-19 restrictions have been relaxed, the use of public transportation and travel to the workplace has not returned to “normal” in most countries.
As a result, in October, the proportion of EU companies that used insufficient demand as a limiting factor in production fell to the lowest level since the start of the EU survey of companies in 1985. At the same time, the current number of months of order guarantee-a measure of full order-has increased to record highs.
This means that even if consumers return to service instead of on goods, it will take a while for companies to refill their shelves.
Schilling told us that the inventory is so low that “you have reached the point where shortages can complement each other.” This is the case in the United Kingdom, for example, where a shortage of truck drivers has triggered a fuel crisis.
Herman said: “Before the second half of 2022, we believe that the interruption will not be completely alleviated.” Although she expects that as consumers spend more on services, some pressure on production capacity will naturally ease, but expand manufacturing capacity And the restrictions on the container fleet are still “key constraints”.
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