Disruption Report #68: Too Many Containers, Inflation Is Down, and China Eases its Covid Restrictions (a little)

Too Many Containers

Do you remember last year when you couldn’t get hold of a container unless you paid what felt like an extortionist price? Well, that was then, and this is now. There is now an abundance of containers.

There are several causes. Containerized freight companies went into a container-building spree early last year. We are seeing the results now, with more containers coming online when demand is down.

There is a lot of inventory sitting in domestic warehouses. There is no need to reorder if you already have more product than you need.

The biggest reason, however, is that demand is down. Consider this statement in a CNBC article by Su-Lin Tan:

Traders and shippers say the decline in global consumer demand is not a sign the global economy is normalizing after a frantic post-lockdown consumption rush but a downward shift in consumption appetites.  

The global shipping industry is facing a new problem — too many containers, CNBC, Su-Lin Tan, November 10, 2022

Families who invest in play choose the experiential route (theme parks, movies, travel) or in-home play with physical toys. After three years of the Pandemic, people satiated with buying “things” are turning to travel and other experiential undertakings. It’s a buying cycle that was supercharged by the Pandemic. It may make for a more challenging than expected end of the year.

Inflation is Down, the Stock Market is Up

A lower-than-expected inflation rate, 7.7%, has created what Bloomberg describes as “euphoria” on Wall Street. Here is how the article” Five Things You Need to Know to Start Your Day,” by Eddie van der Walt, puts it:

The euphoria over slowing inflation in the world’s largest economy looks set to continue, with US index futures and European stocks rallying for a second day. Bond traders too are declaring victory in the Federal Reserve’s fight to curb overheating in the economy.

Five Things You Need to Know to Start Your Day,, Eddie van der walt, Bloomberg, November 11, 2022

Let’s hope those bond traders and investors are right. The quicker we reduce inflation the more likely we are to avoid a recession.

China Eases Pandemic Related Quarantines

We are used to China enjoying meteoric economic growth. Things have not been so enjoyable lately.

China’s economic indicators have gone from mixed to decidedly sour, with exports and imports both unexpectedly dropping in October, bank loans slumping and producer prices falling into deflation for the first time in nearly two years. Beyond the headline numbers, other data look grim, too. There are signs of funding stress, while foreign investors are pulling billions of dollars from Chinese financial markets.

Next China: Souring Mood, Bloomberg news, november 10, 2022

The cause of this bad economic news is China’s overheated response to any Covid breakout. Ports close, factories close, and even cities close, putting millions of people in a quarantine lockdown. The result has been a struggling Chinese economy, vulnerable to the next individual who comes down with Covid and sparks a lockdown.

China’s power depends upon its ability to create jobs, wealth, and harmony. All three are under threat. China has not entirely killed the goose that lays the golden eggs. The goose is on its feet, but it doesn’t look very good.

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