Desperation and distraction are masquerading as economic policy. Below we see how and why...and at what cost...
COVID: The Great Economic and Political Hall-Pass
If every time I stole a cookie from the jar in front of my mom (age 8), or drove dad’s car (sometimes into a tree) without permission (age 16), failed a dorm-room inspection (age 17), broke a lawnmower for driving over a fence post (each year) or forgot a key anniversary (eh-hmm), it would have been so convenient to have a universal “hall pass” to excuse what is/was otherwise just plain stupid behavior.
Luckily for the grown children running our global financial system into the ground, the COVID pandemic is becoming precisely that: “A global hall pass for excusing decades of stupid.”
As we’ve written many times, inexcusably high debt levels, tanking growth data, struggling work force figures, embarrassing wealth disparity and insider market rigging between Wall Street and DC was well in play long before COVID made the headlines.
But now, the architects of such “pre-COVID stupid” have the current COVID narrative to justify and excuse even, well… more stupid.
The Latest Jobs Report “Explained” …
Take, for example, the latest job reports data from those DC-based creative writers at that comic-book publication otherwise known as the Bureau of Labor Statistics (BLS).
Known for years on Wall Street as mathematical magicians capable of turning 12% inflation into a 2% CPI lie, that same BLS is operating yet again to fib away the latest (and otherwise telling) jobs data.
The September jobs report was the second consecutive and disappointing report from the BLS, which they were quick to blame on “pandemic-related staffing fluctuations.”
Hmmm. That’s a nice phrase, no? “Pandemic-related staffing fluctuations.”
But the real description boils down to something more PRAVDA-like under the new Biden Vaccine Mandate, namely: “Obey or we take your job away.”
Needless to say, not everyone is obeying.
Since 2020, employment in local government education is down by 310,000; in state government education, employment is down by 194,000 jobs, and in private education the numbers are down by 172,000.
Why such “staffing fluctuations”?
The answer is simple: Many educated folks in the education sector don’t like being mandated to inject a vaccine into their bodies which by all reports from vaccinated infection rates, is no vaccine at all, but a debatable form of treatment at best.
Thankfully for all of us, I’m not interested in debating the hard vaccine data here, as folks like me should not be proffering unwanted medical expertise, which I clearly lack.
No one, myself included, really knows everything about mutating virology, but I’d wager to say that many of us are more mathematically dubious than Fauci is medically honest…
Jefferson (and History) Ignored
For followers of American history and markets, however, certain ideals and facts are easier to track despite distraction-as-policy tactics.
We are reminded, for example, of how passionately Thomas Jefferson warned us circa 1776 that a private central bank would eventually destroy our nation, and that only an educated population could save it.
Sadly, the new President is taking the inverse approach: Firing teachers and propping bankers.
Fast-forward some 240+ years from our founding fathers to our semi-conscious Biden, and we discover a nation wherein a private central bank effectively finances our national debt while the teachers, students and institutions charged with making citizens wiser, educated and free now find themselves locked out of their offices, classrooms and lecterns.
Seems a little upside down, no?
Red or blue, most of us can agree than nothing coming out of the White House in recent memory remotely resembles the vision or freedom-driven intellect of founding fathers like Jefferson, despite his known flaws.
Instead, we have seen red and blue administrations whose grasp on coherency, let alone math, history, economics or even Afghan geography is questionable at best.
And what does Biden (or his “advisors”) have to say about the recent and scary numbers within a gutted and “locked-out” educational labor force?
Well, you’ll have to see it to believe it..
Really? Really? Really?
That’s right folks.
The President of the United States, home to the world’s reserve currency and former beacon of global freedom, is telling Americans not to worry about the slow death of genuinely informed dissent (as well as educational access and jobs) or the attempted popularizing of otherwise tyrannical mandates, but to focus instead on the vaccine rates at United Airlines?
The leader of the free world is boastfully telling us that the “bigger story” is a fully vaccinated United Airlines (who were forced to choose between a jab or job), so why worry about the problems in that silly ol’ educational sector or outdated Bill of Rights?
Playing with Minnows While Ignoring Whales
Where ever one stands on the understandably divisive vaccine issue, how can anyone compare a private airline’s vaccine rate to a national education, civil liberty and employment crisis?
Why are politicians, Davos dragons, statisticians, media bobble-heads and central bankers focusing our/your attention more on a virus with a case fatality rate of less than 0.5% than they are on openly addressing whale-sized issues like unsustainable debt, rising inflation, embarrassing labor inequality, a dying currency or even more declining GDP?
Deliberate and Desperate Distraction as Policy
Well, history tells us why.
As anyone not banned from a classroom knows, the history of desperate leaders seeking to distract, censor and control the masses in times of a self-inflicted and debt-induced cycle of internal economic rot is long and distinguished.
As Biden doubles down on the bad (yet deliberately distracting) hand of what was hoped to be an optically humanitarian policy of vaccine mandates, the masses are getting restless as well as fired…
Criminalize the non-consenting as anti-vaccine, anti-science or anti-American “flat-earthers” while denying open discussion on such otherwise relevant topics as basic math, constitutional law, calm science or individual rights…
Meanwhile, those who won’t tow Biden’s increasingly incoherent mandate (or Don Lemmon’s always coherent ignorance) are losing jobs and/or forced to prioritize (in a Jeffersonian way) individual liberty over financial security.
Ben Franklin, of course, said those who surrender liberties for security deserve neither.
In such a polarized backdrop, everyone, pro or anti-vaccine, loses.
Informed, open and calm debate has been replaced by a contradictory, censored, sanctimonious and hysterical autocracy from prompt-readers to political puppets.
So much for leading the free world… Let me remind Biden to consider the words of another founding father, Thomas Paine:
“I have always strenuously supported the right of every man to his own opinion, however different that opinion might be to mine. He who denies to another this right, makes a slave of himself to his present opinion, because he precludes himself the right of changing it.”
As someone who studied and practiced constitutional law, worked within a rigged Wall Street and read nearly every book I could find on America’s founding fathers, I can say without hyperbole that I no longer recognize the country (or values) of my birth nation.
As Franklin also noted, “All democracies eventually die; usually by suicide.”
But let’s get off my high-horse and back to those job reports…
Conviction vs. Employment
As Bloomberg recently noted, the result of these “pandemic-related staffing fluctuations” is a bit alarming.
The following critical industries are witnessing the following job-loss percentages: Nursing and Residential Care (-1.26%); Local Government Education (-1.83%); Community Care for the Elderly (-2.20%) and lodging (-2.25%).
But thank goodness that despite a deliberate weaning of nurses, teachers and elderly care experts, United Airlines is nearly fully vaccinated and our Motion Picture Industry (universally known for its astounding political and financial wisdom) is seeing a +4.21% job increase.
Awe, but as Johny Mellencamp would say, “Aint that America?”
Now instead of more employed and free-thinking nurses, teachers and students allowed to gather, speak and think freely at their own campus or clinic, we can be glad that jobs in Hollywood, like DC, are growing to keep us living on more fantasy rather than actual, informed and hard-earned knowledge.
Oh, and the Economy…
But rather than just rant otherwise rhetorical sarcasm, let’s get back to those other barbaric (and soon-to-be empty) old-school disciplines like economics…
Biden’s mandates are more than just evidence of distraction as policy and constitutional interpretation/usurpation, they have direct impacts on our financial lives outside of the deliberately exaggerated vaccine debacle/debate.
Let’s go down the list of what economics taught us years ago, when we were allowed to enter a classroom:
- Stagflation Ahead.
As more and more folks are locked out of work, the entitlement costs for these “un-American” free-thinkers will rise, placing greater inflationary pressures upon a deliberately constrained rather than open economy.
Rising inflation + slowing economic activity = stagflation.
Prepare for this, as that’s what’s coming.
Inflation, by the way, is an invisible tax on those who can afford it the least. Thanks again Powell et al for shafting the middle class…
- A Divided States of America
A country which once revered open rather than censored debate, investigative rather than complicit journalism, and respected rather than polarized differences of opinion, is becoming increasingly factionalized, divided and angry.
Jab or no jab, I fully respect both views. Can’t we all do the same without a “mandate”?
Like Thomas Paine, I hope so, because as Thomas Jefferson warned, we face far greater economic and political threats ahead than COVID.
Rather than accountability, transparency and cooperation, leadership today is defined by fantasy and magic, from magical money created at the Fed to magical employment and CPI data downplayed at the BLS.
Whenever backed into a debt corner of their own design, leaders employ a familiar combo of boogeyman and salvation narratives to divert the masses away from the slow-drip erosion of their personal liberties, dying currencies and debt-driven stagnation.
This distraction-as-policy is happening right now. The rise of the COVID narrative in 2020 is more than a coincidence. It’s a conveniently exploited opportunity for political and financial opportunists.
- More Centralized Controls and Fake Markets
With debt levels far beyond the Pale of productivity levels (i.e., embarrassing debt to GDP ratios), the U.S. and other developed economies are mathematically and factually unable to ever grow their way out of the debt hole they have been digging us into for years.
Period. Full stop.
If I know this, and if you know this, well…they certainly know this too in DC.
The only difference is that these policy makers, like most kids caught with a hand in the cookie jar, are incapable of admitting fault.
Instead, today’s “leadership” can blame their economic and policy failures (and self-preservation rather than “service” instincts) on something else—i.e., “COVID did it.”
But as we’ve voiced elsewhere, the debt time bomb, growth declines, social unrest, wealth disparity and failing political credibilities in play today were already a major problem BEFORE COVID.
Now, as then, the empirical data objectively confirms that tanking manufacturing data, jobs growth, economic productivity, broken supply chains, scary transport numbers and political mistrust can never service the over $28.5T in public debt sitting on Uncle Sam’s bar-tab.
As a natural result, we can therefore expect far more “accommodation” (i.e., monetary expansion) from the Fed, and far more “Fiscal Stimulus” (i.e., deficit spending) from our comical legislature ahead.
Stated otherwise: Get ready for more real debt, fake money, centralized controls and hidden wealth destruction.
Zombie Stocks, Bonds and Bankers: Too Big to Fail 2.0
Sadly, one of the only forms of income which Uncle Sam enjoys today is the capital gains receipts from a bloated, rigged and artificially Fed-supported stock market.
This means we can anticipate more “stimulus” for a zombie, crack-up-boomed market well past its natural expiration date.
The same is true of for government IOU’s. No one wants our bonds. 2020 saw $500B in foreign outflows rather than inflows for US Treasuries.
So, who will pay Uncle Sam’s bar tab now?
Easy: Uncle Fed at the Eccles Building down the avenue from a Treasury Department now led by a former Fed Chairwoman.
One really can’t make this crazy up. It’s all that real, that rigged and that true.
The U.S. debt crisis is now being “solved” by a circular loop of a Wall Street and a White House children tossing their hot potatoes of bad debt (MBS and sovereign) around until they are bought with money created out of thin air by the Fed.
And yet despite such insider support, rigged markets and “accommodated” securities, even the rising tax receipts from these bloated markets are not enough to cover the interest expense on Uncle Sam’s bar tab.
In short, US Treasury bonds and stocks are openly supported Frankenstein-assets kept alive by a central bank and White House cabal (sorry, Mr. Jefferson…) who blame every problem (and justify every expenditure) on a virus rather than confess to the cancerous reality of over 20+ years of their open and obvious mismanagement of a rigged banking and distorted financial system.
But rather than account for such sins, we can expect a bigger bail-out rather than an honest confession…
In 2008, for example, the response from DC and NYC to bankers gone mad was to declare bankrupt banks as “Too Big to Fail.”
Fast-forward some 13 years later and that same toxic duo of bankers and politicos have now effectively telegraphed that bankrupt government bonds and private stocks are also “too big to fail.”
That ought to anger an informed population. But instead, we are fighting about masks, vaccine shaming and Prince Harry’s sensitive upbringing.
So far, the distraction-as-policy technique seems to be working in favor of the foxes guarding our financial henhouse.
Signal More Currency-Debasing “Miracle Solutions”
Which brings us right back to a harsh but increasingly undeniable yet ironic reality.
If objectively broken bonds, stocks and financial regimes are too big to fail, then the only way to “save” them is with more mouse-click-created currencies which are too debased to succeed.
As precious metal and other long-term, real-asset investors long ago understood, currency expansion is just another name for currency debasement.
In other words, eventually, all that “system saving” new money simply drowns the system it was allegedly designed to save in ever more debased dollars.
Again, it’s just that tragic and just that simple.
Yes: More monetary and debt expansion can buy time and rising markets.
But those markets are measured in currencies which time has equally taught us lose their value with each passing second.
And the only ones paying for that time are you and I–with dollars, euros, yen and pesos whose purchasing power and inherent value are tanking faster than the credibility of the folks who brought us to this historical and debt-driven turning point.
Stated bluntly: The financial and political leadership of the last 20+ years has placed the global financial system into a debt corner for which there is no exit other than deliberate inflation (and hence currency debasement).
This foreseeable disaster, however, is now conveniently blamed on a current pandemic rather than a grotesque history of equally grotesque mismanagement by policy markets who have confused debt with prosperity and double-speak with accountability.
Wouldn’t it be nice if such economic topics were making at least as many headlines as the latest infection rates?
Meanwhile, the mainstream media pursues plays chess with context-empty headlines, bogus job data and ignored debt bombs as our economic Rome (and currencies) burns silently around us all.
Shortage of workers threatens UK recovery – here’s why and what to do about it
The nation has very low unemployment figures, but that masks a complex labour market.
For the first time since records began, there are more job vacancies in the UK than unemployed people, according to the latest monthly labour market figures. This has been driven mainly by a near-fourfold surge in job vacancies to around 1.3 million since the summer of 2020, when economic activity was allowed to resume at the end of the first COVID lockdown.
Record vacancies might seem like a good thing in terms of maintaining low unemployment. But employers across all sectors of the economy are struggling to fill vacancies, which limits economic recovery. So what explains all these vacancies, and what can be done about them?
First of all, the spectacular rise in job vacancies goes far beyond a pre-pandemic “bounce back”. Although the biggest shortages are in hospitality, there have been substantial rises across most sectors. All are above pre-pandemic levels.
Job vacancies and unemployment (thousands)
Demand for labour (that’s all employment plus vacancies) has recovered to almost exactly its pre-pandemic level. But the data indicates that the increase in vacancies is not due to a surge in demand for labour, but because the labour force is shrinking: it dropped by 1.6% or 561,000 between the first quarters (Jan-March) of 2020 and 2022, which is greater than the increase in job vacancies over the same period (492,000).
Notably, people’s reasons for being economically inactive have changed over the past couple of years. Following the first COVID lockdown, the large drop in labour supply among 16-64s (those of working age) was mainly driven by rises in long-term sickness (139,000) and early retirement (70,000).
Reasons for economic inactivity over time, 16-64 year olds
The drop in the workforce also masks a considerable churn within it, which may be adding to employers’ difficulties in recruiting staff. During the first lockdown, the number of EU workers fell by some 300,000. This has partially recovered, as you can see in the chart below, but there are still around 100,000 fewer than at the start of the pandemic.
Yet this has been more than offset by continued long-term growth in the number of non-EU foreign-born workers in the UK, increasing by some 170,000 since the start of the pandemic. Brexit, in other words, in tandem with the pandemic, has been a source of churn in the labour market.
Change in non UK-born workforce 2019-21
The geographic dimension
Until now, little has been known about where this sharp rise in vacancies has been happening, which is an important question if the government is to be able to address geographical imbalances in the economy through its “levelling up” policy.
To help remedy this, we have been studying comprehensive online job vacancy data obtained under a special research agreement with the Urban Big Data Centre at the University of Glasgow to use data scraped from the Adzuna job vacancy search engine. Our data analysis is not yet published in the academic literature, but it provides an early indication of the overall pattern.
The rise in the rate of job vacancies appears remarkably uneven across local authority districts in Great Britain. The two maps below show the change from before the pandemic in February 2020 (on the left) to July 2021 (on the right), the most recent month for which we have been able to compute data. This is likely to still be indicative of the most recent geographic pattern.
Vacancies growth between February 2020 and July 2021
It shows huge increases in vacancies in relatively few districts, while most others show either modest increases or falls. The highest rates are particularly found in remoter rural areas, particularly in the south-west and north-west of England, and in parts of inner London.
Many of these districts are dependent on foreign labour, particularly for agriculture in rural areas, and hospitality and other sectors in London. Again, this may be a sign of the effect of Brexit and the pandemic choking off the growth in the number of EU workers.
What can’t be denied is that the employment market has been restructured in several major inter-related ways in a relatively short period, not only with Brexit but also thanks to rapid increases in remote online working, disruption to global supply-chains and COVID-related ill health.
It would make sense for these factors to produce “mismatches” between the skills and locations of workers and vacancies. For example, many job seekers have skills in declining occupations, such as skilled manual work. Our own analysis backs this up, since we see more job seekers than vacancies in some former industrial towns, particularly in the West Midlands and northern England – exactly the opposite problem to some inner London boroughs and rural districts.
What should be done
Places across the UK where job vacancies are concentrated are likely to experience sharp economic contractions if they are unable to attract more workers soon. Yet the areas that have experienced drops or weak growth in vacancies compared to before the pandemic are also a concern, as they may have been hit harder by issues like global supply chains and the pandemic and may not have enough jobs to go around.
Policies to combat Britain’s labour shortage must therefore be geographically targeted. Areas in need of more jobs, particularly higher-paying jobs, often require long-term investment in infrastructure and skills.
But to help areas in need of more workers, there will need to be creative solutions such as employers offering attractive packages including training and flexible working, and local and national authorities ensuring adequate local availability of affordable housing.
The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.unemployment pandemic economic recovery lockdown recovery uk eu
3 Nursing Home Stocks to Watch in 2022
By 2050, 22% of Americans will be seniors. The value of nursing home stocks should reflect that aging cohort. Keep reading to learn more.
The post 3 Nursing…
No one ever said they want to spend the rest of their lives in a nursing home. Unfortunately, the reality is that’s where a significant portion of the elderly and disabled population end up. Demographically, about 16.5% of the American population is currently over 65. By 2050, 22%, or more than one out of five Americans will be seniors. The value of nursing home stocks should reflect that rapidly aging cohort.
The Eldercare Industry
The eldercare industry consists of various sectors. For instance, these include:
- Independent living
- Assisted living facilities
- Skilled nursing facilities
- Nursing homes
We’ll concentrate on companies whose primary business involves skilled nursing facilities and nursing homes. The difference between the two is that the former is a temporary residence for those undergoing medical rehabilitation, and the latter is a home for residents requiring 24/7 care. In fact, there is a fair degree of overlap between them.
Keep reading for more info on nursing home stocks.
No. 3 National HealthCare Corporation (NYSE: NHC)
Headquartered in Murfreesboro, Tennessee, National HealthCare Corporation operates 75 skilled nursing centers, 24 assisted living facilities, 35 home care agencies, 29 hospice agencies and five retirement communities. Other services include rehab facilities, senior care pharmacies, memory care and a hospital. NHC has been in business for 50 years. It’s the country’s oldest publicly-traded long-term healthcare company. Additionally, most of its facilities are located in the southeastern U.S.
In 2021, its net operating revenues and grant income totaled $1,074,302,000. That was an increase of 4.5% compared to 2020’s net operating revenues of $1,028,217,000. However, most of that increase was attributable to the June 2021 controlling equity acquisition of hospice provider Caris Healthcare.
As of May 17, 2022, the stock’s 52-week history ranges from a low of $61.89 to a high of $78.42. On May 5, the nursing home stock announced a 3.6% dividend increase for the second quarter over the first quarter of 2022.
No. 2 Omega Healthcare Investors (NYSE: OHI)
Omega Healthcare Investors is a triple net equity Real Estate Investment Trust (REIT). OHI has been investing in senior care for 30 years, providing capital for operators of skilled nursing facilities and assisted living facilities. It partners with 64 of “the most future-focused, growth-oriented” operators in the U.S. and U.K. The REIT has helped these operators accelerate their growth strategies via $1.45 billion in unsecured credit.
On May 2, 2022, the company announced results for the first quarter of 2022. Additionally, net income was $195.2 million or $0.79 per common share. CEO Taylor Pickett said OHI’s near-term Funds from Operations (FFO) and Funds Available for Distribution (FAD) financial results were affected by the nonpayment of rent by several operators. However, as the impact of the Omicron variant receded, portfolio occupancy improved as the quarter progressed. This nursing home stock declared a $0.67 per share cash dividend on common stock.
In the first quarter, OHI acquired 27 care homes in the U.K. for $100 million. Earlier in the quarter, it acquired three other U.K. care homes. Two were purchased for $8 million and the third for $5 million. It also bought a Maryland skilled nursing facility for $8.5 million in this period. Under its capital renovation and construction program, OHI invested $20 million in this quarter. Additionally, as of May 17, OHI’s 52-week range was $24.81 to $38.19.
No. 1 Sabra Health Care REIT (Nasdaq: SBRA)
Based in Irvine, California, and operating since 2010, Sabra Health Care REIT invests in skilled nursing facilities, behavioral health facilities, and senior housing throughout the U.S. and Canada. While there are Sabra-owned properties in 41 states, the bulk of its U.S. holdings is located in Texas and California. This nursing home stocks portfolio currently consists of 416 real estate properties for investment. For example, these include:
- 279 Skilled nursing facilities
- 59 Senior housing communities
- 50 Senior housing communities operated by third-party managers
- 13 Behavioral health facilities
- 15 Specialty hospitals
Taken together, these investment properties total 41,445 beds or units.
According to its first-quarter 2022 earnings report, Sabra collected 99.5% of its forecasted rents from the beginning of the pandemic up to April 2022. While there were “initial headwinds” related to the Omicron variant, the company’s seven largest skilled nursing tenants saw sizable occupancy increases during this quarter. The company has approximately $1 billion in liquidity,
The company declared a quarterly cash dividend of $0.30 per share of common stock. In addition, as of May 17, the company’s 52-week range was $11.44 to $19.02.
Nursing Home Stocks Challenges
Nursing home residents were particularly vulnerable to COVID-19. Many of these elderly residents died during the earliest days of the pandemic. In addition, staffing shortages exacerbated the dire conditions in many nursing homes during this time. Due to long-term triple net leases, REITs were insulated to some degree, as long as operators continued to pay the rent.
There is also a move by the government to push private equity out of the skilled nursing sector. In 2021, 89% of the $3.7 billion spent on skilled nursing transactions involved private buyers. The view is that Wall Street’s acquisition of nursing home stocks was resulting in a lower quality of care and higher costs in nursing homes.
Nursing Home Stocks Considerations
By 2030, less than a decade from now, every Baby Boomer will be over 65. Those over 85, the group most likely to need nursing home care, is growing even faster. Although nursing home stocks were hit badly by the pandemic, the sheer number of elderly people and a caregiver deficit should mean such facilities are the only option for many in the near future.nasdaq stocks pandemic covid-19 reit real estate canada
Global Supply Chain Pressure Index: May 2022 Update
Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. Furthermore, recent developments related…
Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. Furthermore, recent developments related to geopolitics and the pandemic (particularly in China) could put further strains on global supply chains. In a January post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. We revisited our index in March, and today we are launching the GSCPI as a standalone product, with new readings to be published each month. In this post, we review GSCPI readings through April 2022 and briefly discuss the drivers of recent moves in the index.
More Stress on Supply Chains
The chart below provides an update of the GSCPI through April; readers can find a link to the updated data series on our new product page. Between December 2021 and March 2022, the index registered an easing of global supply chain pressures, though they remained at very high levels historically. However, the April 2022 reading suggests a worsening of conditions as renewed strains emerge in global supply chains.
April Data Indicate Worsening of Supply Chain Pressures
Before analyzing this recent pickup in supply chain pressures, we remind readers that the GSCPI is based on two sets of data. Global transportation costs are measured by using data on ocean shipping costs, for we which we employ data from the Baltic Dry Index (BDI) and the Harpex index, as well as BLS airfreight cost indices for freight flights between Asia, Europe, and the United States. We also use supply chain-related components of Purchase Manager Index (PMI) surveys—“delivery times,” “backlogs,” and “purchased stocks”—for manufacturing firms across seven interconnected economies: China, the euro area, Japan, South Korea, Taiwan, the United Kingdom, and the United States. Before combining these data within the GSCPI by means of principal component analysis, we strip out demand effects from the underlying series by projecting the PMI supply chain components on the “new orders” components of the corresponding PMI surveys and, in a similar vein, projecting the global transportation cost measures onto GDP-weighted “new orders” and “inputs purchased” components across the seven PMI surveys.
Sources of Pressure
So, what are the drivers behind recent moves in the GSCPI? The charts below illustrate how each of the underlying variables contributed to the overall change in the GSCPI in the last two months. Each column represents the contribution, in standard deviations, of each component of our index to the overall change in the index during a given period. In the first chart, we examine February-March 2022. We note that the lessening of supply chain pressures over this period was widespread across the various components, which indicated a welcome reduction in global supply chain disruptions. Most of the series in our data set declined over this period; the U.K. “backlog” component worsened and the U.S. “purchased stocks” component increased marginally.
Widespread Improvements Seen across Components in March 2022
In the chart below, we focus on the contributions of the underlying components of the GSCPI from March to April 2022.
Global Supply Chain Pressures Worsen in April 2022
As the chart indicates, the worsening of global supply chain pressures in April was predominantly driven by the Chinese “delivery times” component, the increase in airfreight costs from the United States to Asia, and the euro area “delivery times” component, as other components have eased over the month. These developments could be associated with the stringent COVID-19-related lockdown measures adopted in China, as well as the consequences of the Ukraine-Russia conflict for supply chains in Europe.
Finally, as we noted in our previous post and discuss on our product page, recent GSCPI readings are subject to revision. The chart below compares the current GSCPI release with the previous three releases, showing that revisions can have an impact up to a year back in time. The chart indicates that, based on the current vintage of the GSCPI, the decrease in global supply chain pressures through April occurred at a slighter faster pace than previous GSCPI estimates had suggested.
Revised and Realized Data Can Alter Previous Supply Chain Pressure Readings
In this post, we provide an update of the GSCPI through April 2022. This estimate suggests that the moderation we have observed in recent months has been partially reversed, as lockdown measures in China and geopolitical developments are putting further strains on delivery times and transportation costs in China and the euro area. Forthcoming readings will be particularly interesting as we assess the potential for these developments to further heighten global supply chain pressures.
Gianluca Benigno is the head of International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Julian di Giovanni is head of Climate Risk Studies in the Bank’s Research and Statistics Group.
Jan J.J. Groen is an economic research advisor in the Bank’s Research and Statistics Group.
Adam Noble is a senior research analyst in the Bank’s Research and Statistics Group.
How to cite this post:
Gianluca Benigno, Julian Di Giovanni, Jan Groen, and Adam Noble, “Global Supply Chain Pressure Index: May 2022 Update,” Federal Reserve Bank of New York Liberty Street Economics, May 18, 2022, https://libertystreeteconomics.newyorkfed.org/2022/05/global-supply-chain-pressure-index-may-2022-update/.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
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