U.S. Nonfarm Productivity Plunges and Unit Labor Costs Surge in Q3’21

Nonfarm business sector productivity fell 5.2% (SAAR) (-0.6% y/y) in Q3’21, revised from a preliminary 5.0% decline and following a 2.4% Q2 increase. It was the sharpest decline since Q2’60. A 5.0% decline had been expected in the Action Economics Forecast Survey.

Nonfarm business production grew 1.8% last quarter (6.2% y/y). The gain was the smallest in five quarters. Growth of hours-worked surged to 7.4% (6.8% y/y), the strongest rise in three quarters.

Compensation per hour rose 3.9% (5.8% y/y), the fourth straight quarter of growth and revised from a preliminary rise of 2.9%.

The rise in compensation and the fall in productivity combined to lift unit labor costs 9.6% (6.3% y/y) to a record level, revised from a preliminary rise of 8.3%, and following a 5.9% increase in Q2. An 8.3% increase had been expected.

In the manufacturing sector, productivity declined 1.8% (2.2% y/y), revised down from 1.0% and after surging 8.4% in Q2. Output rose 5.1% last quarter (6.1% y/y), revised down from a 5.7% rise, and hours-worked increased 7.0% (3.9% y/y), revised up from a 6.7% rise and after falling 2.5% in Q2. Factory sector compensation rose 2.7% in Q3, firm for the fourth straight quarter. Unit labor costs rose 4.6%, revised up from a 2.9% increase and following a 1.7% rise in Q2.

Indexing to Q1’20 = 100, ULC are clearly accelerating but surging demand has protected margins so far:

Here’s another way to plot the same data…

…explaining the declining margins before Covid-19:

Inflation Emerges as a Key Concern for Voters, WSJ Poll Finds The new Wall Street Journal poll finds that a majority of voters say inflation is causing them financial strain.

Some 56% in the new survey said inflation was causing them major or minor financial strain, including 28% who said they felt major pressures. More than half said gas and groceries were among their greatest concerns when it came to rising prices, with about a quarter citing housing and utility bills. (…)

Some 52% said they expected the cost of living to worsen in the next year, compared with 23% who said it would likely ease. (…)

Views were more tempered when voters were asked about their personal financial situation: Some 31% said they believed it would improve in the next year, compared with 24% who said it would get worse. Some 38% expected no change. (…)

Companies Plan Big Raises for Workers in 2022 Companies are planning for steeper wage increases next year than at any point since the 2007-2009 recession, according to a new report, amid a tight labor market and the highest inflation in three decades.

A survey by the Conference Board set for release Wednesday finds that companies are setting aside an average 3.9% of total payroll for wage increases next year [vs 2.9% on average since 2011], the most since 2008.

The survey also shows that companies are planning on raising salary ranges, which would result in higher minimum, median and maximum salaries. That suggests pay raises could be broad-based and affect workers across a company’s pay scale. (…)

• British supermarket chain Tesco facing pre-Christmas strikes Warehouse and truck drivers based at depots in Belfast and Antrim in Northern Ireland, Didcot in southern England and Doncaster in northern England were taking strike action in protest over the supermarket group’s offer of a 4% pay rise.

Retailers Restocking Inventory Face a Potential Post holiday Hangover Merchants are rushing in orders ahead of the end-of-year holidays, but delivery delays may leave them with a surplus of untimely wares

(…) “We’d much rather have too much inventory than not enough,” said Ms. Pasqualone. “But then that eats up your margins as well.” (…)

Broad measures show retailer stocks remained severely depleted heading into the fourth quarter. U.S. retailers held $602.7 billion in inventories in September, according to U.S. Commerce Department figures, compared with the $664.4 billion they held in September 2019, before the pandemic upended supply chains. (…)

The risks of overbuying are higher for retailers that sell a narrow range of products or goods that age quickly, such as fast fashion or Christmas sweaters, than they would be for general merchandisers whose array of merchandise provides a natural hedge. (…)

Supply-Chain Snags Likely to Persist, Three CEOs Say The chiefs of Intel, Wayfair and Accenture each said that the disruptions rippling across the U.S. economy are improving for some companies but that long-term fixes might take much longer.

(…) Chip giant Intel, which has been at the center of the global semiconductor shortage, expects supply-chain issues to last through 2023, partly because it takes three years to build a new factory, CEO Patrick Gelsinger said. (…)

He said the company has plans for a large U.S. factory he called a “megasite” to move production closer to where chips are needed. (…)

Yellen Says Supply-Chain Shift May Need Protectionist-Like Steps

(…) “It’s possible that policies that people will describe as protectionist are going to be necessary in order to create the appropriate incentives to produce things at home,” Yellen said in an interview recorded on Monday for an online conference hosted by the Financial Times.

The Treasury chief also said, “certainly we want to work with other countries — with our allies and partners — to address supply-chain resilience on a collective basis,” in remarks aired Tuesday. “So, I don’t think this is just about the United States making everything at home, but in some cases that may be part of the answer.” (…)

Yellen also repeated her views that elevated inflation was mainly caused by pandemic-related supply issues, and that it would fade as the virus came under control. She said she saw no evidence of a wage-price spiral that could sustain the pace of price increases for an extended period.

While the economy and the jobs market remained strong, she conceded that the continued low supply of labor was “a mystery” amid the high demand for workers. (…)

INFLATION VS PROFIT MARGINS

The latest IHS Markit US Sector PMI™ revealed that six of the seven broad sectors tracked by the surveys reported higher output in November, up from five in October, with the Technology sector having returned to growth. Healthcare continued to lead the sectors, which perhaps comes as no surprise amid the slight pick-up in COVID-19 cases across the US.

Consumer Goods, on the other hand, persisted as the worst performer and remained in contraction. Worryingly however, rather than being demand led, the lowered output had been a reflection of the lingering supply chain crisis. (…)

Studying the US Sector PMI sub-indices performance, one would find that output had indeed been lagging demand primarily across goods-producing sectors including most notably Consumer Goods but also Technology and Basic Materials. This is an important issue as highlighted in our IHS Markit US Manufacturing PMI report.

Despite some of these supply chain problems having eased in November, the extent to which production growth had been constrained is consistent with manufacturing acting as a drag on the economy during the fourth quarter. Similarly for US sectors, this will be something to continue scrutinising given the potential drag this could pose to output and thereby corporate earnings going into 2022.

US sectors output minus new orders indices

Of no surprise here, the demand-supply imbalance had thereby proven it is a sellers’ market as input prices surged across all seven sectors. This was most notable amongst the goods-producing sectors, led by the Consumer Goods sector in November.

Meanwhile, consistent with the global trend, service sectors had similarly experienced higher costs, driven by higher material prices, energy prices and staff costs. This is also observed through the wider US manufacturing and services PMI price indices.

Although IHS Markit continue to view the issue of soaring inflation rates, particularly in the West, as a bigger problem in the short-term with headline inflation rates set to moderate from 2022 as supply bottlenecks clear and pent-up demand dissipates, the potential “second round” effects – whereby current elevated inflation rates could feed through to higher wages – should not be ignored. The potential for this to become a bigger problem will continue to be watched through the mix of US sector performance going forward.

US sectors input price indices

For investors, the next chart is the most intriguing. As the recent PMI surveys have revealed, manufacturers are finding it increasingly difficult to fully pass on their cost increases. The “sellers’ market” is weakening as consumers are balking at higher prices. Look at the huge and rising gap between manufacturing input and output prices. In the last 4 months, fewer and fewer companies have increased output prices while more and more of them reported rising input prices:

US manufacturing and services price indices

While goods inflation may be slowing (but not declining), both output and margins seem to be suffering during Q4.

Gundlach Sees ‘Rough Waters’ for Market as Fed Pursues Taper

During a webcast Tuesday about his DoubleLine Total Return Bond Fund, the billionaire money manager advised keeping an eye on the high-yield bond market, a potential “canary in the coal mine” for risk assets.

With debt levels having surged during the pandemic, the increase in borrowing costs is poised to create headwinds for economic growth, and trouble could emerge when short-term rates surpass 1%, Gundlach said. Two-year yields are currently about 0.69%.

The bond market already is reflecting signs of difficulty ahead, with the yield curve flattening. Gundlach also said that the historically low level of yields across the curve today makes this flattening a doubly powerful signal of concern.

Here are some other takeaways from Gundlach’s remarks:

• He focused heavily on inflation, saying the annual pace of gains in the consumer price index could hit 7% in the next month or two. He ran through numerous inflation measures and pointed out that shelter costs have climbed significantly. He also said it’s possible that the CPI inflation gauge won’t drop below 4% throughout 2022.
• Markets could face more volatility now that the Fed has said it might quicken its tapering program.
• Gundlach reiterated that he bought European stocks for the first time in 12 years, which he disclosed a few months ago. He still owns some of those and they’ve done just OK until recently. He didn’t own emerging-markets equities, though he envisioned a scenario when they might outperform U.S. firms. “We’re looking for major opportunities” and emerging markets could be one over the next few years, he said.
• The dollar has been in structural decline since 1985, he said, reiterating that the twin-deficit problem (that’s the current-account gap and the federal budget deficit) will cause the greenback to fall over time, which bodes well for emerging markets.
• Gundlach said he’s not sure “it’s the greatest time to buy commodities” given how much their prices have been rising. And for preservation of capital, he recommended a short-duration bond fund.
• He said he last bought gold, personally, in 2018 and that he likes it as a long-term hold.

Chinese developer Kaisa suspends share trading as potential default looms

Studies suggest Pfizer shot may protect only partially against Omicron

The Omicron variant can partially evade protection from two doses of Pfizer (PFE.N) and partner BioNTech’s COVID-19 vaccine, the research head of a laboratory at the Africa Health Research Institute in South Africa said on Tuesday.

But the study showed that blood from people who had received two doses of the vaccine and had a prior infection was mostly able to neutralize the variant, suggesting that booster doses of the vaccine could help to fend off infection. (…)

The World Health Organization classified it on Nov. 26 as a “variant of concern,” but said there was no evidence to support the need for new vaccines specifically designed to tackle the Omicron variant with its many mutations. (…)

A separate lab test by virologist Sandra Ciesek of the University Hospital Frankfurt painted a somewhat bleaker picture.

Exposing the blood of vaccinated individuals to different virus variants, she found that the ability to mount an antibody response to Omicron in people who had three shots of BioNTech/Pfizer was up to 37 times lower than the response to Delta.

An antibody response to Omicron half a year after a two-shot regimen of Pfizer/BioNTech, Moderna or a mixed course of AstraZeneca/BioNTech was not even measurable, Ciesek added. (…)

“The set of data underscores that it makes sense to develop a vaccine that is adapted to Omicron,” Chiesek tweeted, adding that no conclusion could be drawn about protection against severe disease. (…)

There is not significant data yet on how vaccines from Moderna (MRNA.O), Johnson & Johnson (JNJ.N) and other drugmakers hold up against the new variant. (…)

But this morning:

Pfizer, BioNTech Say Third Dose Neutralizes Omicron Variant

Pfizer Inc. and BioNTech SE said initial lab studies show a third dose of their Covid-19 vaccine neutralizes the omicron variant, results that will accelerate booster shot drives around the world.

A booster with the current version of the vaccine increased antibodies 25-fold, providing a similar level as observed after two doses against the original virus and other variants, the companies said Wednesday. (…)

“It’s clear from these preliminary data that protection is improved with a third dose,” Pfizer Chief Executive Officer Albert Bourla said in a statement. The initial data show a third dose could offer still offer enough protection from disease, BioNTech CEO Ugur Sahin said. (…)

And from Dr. Katelyn Jetelina

Omicron: We’re getting (some) answers

Our first Omicron lab study was released today. A group of South African scientists, led by Dr. Alex Sigal, mixed a live virus with blood samples of 6 people who had 2 doses of Pfizer. They also mixed the virus with blood samples of 6 people with the 2-dose series and a previous infection. (South Africa has not authorized boosters yet, but this is a good proxy).

In order to assess vaccine “effectiveness,” the scientists counted the number of neutralizing antibodies that attached to Omicron. Neutralizing antibodies play a significant role in our protection against infection, as they quickly recognize the virus and destroy it. Importantly, the virus is destroyed before entering cells and, thus, cannot replicate. Because it can’t replicate, the person doesn’t get infected and doesn’t get disease (i.e. symptoms). The more neutralizing antibodies we have the better.

In this study, the scientists assessed how Omicron enters our cells and how many antibodies respond to Omicron compared to the original SARS-CoV-2 virus. What did they find?

1. The virus is using the same door into our cells (called ACE2 receptors) as before. This is very good news because it means our tools (like vaccines) are still useful. If the virus found a different door, this may not have been the case.

2. The virus is making a smarter key to that door. (…)

   • Among people with the 2-dose Pfizer series (orange dots), neutralizing antibodies took a significant hit —40 fold reduction— with Omicron compared to the original virus. This is far higher than we’ve seen with any previous variants of concern (Delta had a 5 fold decrease; Beta had a 8 fold decrease). But, honestly, Omicron’s decrease is not as bad as some expected.

   • Among people with the 2-dose series + previous infection (green dots), neutralizing antibodies took a hit from Omicron but are still relatively high.

This means we’re going to see an increase in breakthrough cases, especially among those with 2 vaccines. But this study gives me great hope that our boosters will help protect against Omicron. In addition, and importantly, neutralizing antibodies are not our only defense. We have other antibodies, B-cell factories, and T-cells (I explained them here) that will also help protect against severe disease and death. It will take time and more data to determine if we need an Omicron-specific booster. (…)

The R(t)—a measure of contagiousness— in South Africa is holding steady at an incredibly high rate: R(t)= 2-3. (…) This means that there’s far less in Omicron’s way, like immunity, than before. This makes sense now with the lab data.

There was hope that Omicron might not spread as fast in Europe or the States. We wouldn’t necessarily see the same rate of spread as in South Africa because high rates of Delta and vaccination would be in Omicron’s way.

We’re starting to get data from the UK and it’s really not looking good. On Dec. 2, 2% of their PCR swabs were positive for Omicron. This is compared to less than 0.01% positive PCRs on Nov 20. Mathematical models estimated an R(t) of 3.47 in the UK right now. This is likely an overestimation, but even the best case scenario (i.e. lower bound) of the R(t) is concerning at 2.75. This tells us that high levels of Delta and/or immunity are not stopping Omicron in the UK. And it probably won’t stop Omicron in the United States either. We need to continue to watch this, but this is not a great start at all.

Omicron is causing a lot of infection very quickly across different landscapes. But infection is very different than severe disease or death. So, what’s happening to people that do get infected?

In Gauteng, hospitalization of COVID19 cases in South Africa’s epicenter is increasing exponentially. And it looks like it’s accelerating at the same rate as previous waves.

Weekly Hospital Admissions in Gauteng (log scale) from the Financial Times

But a report from one of these hospitals provided more context about individual hospitalizations over the weekend. Among a sample of 42 COVID patients in the hospital on Dec. 2, most were hospitalized “with COVID19” not “for COVID19.” Among the 42 patients, 9 (21%) had a diagnosis of COVID19 pneumonia. Among the 9 pneumonia patients, 8 were unvaccinated and 1 was a child. There were 4 patients in high care and 1 in the ICU.

This is a very important on-the-ground perspective. But it is still a very small piece of the puzzle. It is far too early to conclude that Omicron is mild; there are a variety of factors tangled up with each other:

1. Are we seeing mild cases because vaccines are working or because Omicron is a less severe disease? We can have a virus that leads to mild cases, but isn’t less severe.

2. Are the majority of cases mild because South Africa has a relatively younger population than, for example, the United States? Extrapolating real-world data from one place to predict how we will do in another place is not straightforward.

3. Is Omicron growing too quickly, so we don’t have enough data yet? This may seem counterintuitive, but in a fast-growing epidemic, the proportion of cases is actually smaller than the proportion of cases in a slower growing epidemic. I tried to show this phenomenon in the figure below. At the same point in the wave, the proportion of Delta cases (orange highlight) was far higher than the proportion of Omicron cases (green highlight). This factor alone could cause an unusually low proportion of hospitalizations at first. We have to see what happens when this denominator gets bigger and bigger.

   

   We may already be seeing this in the data, too. The acceleration of patients in the ICU and ventilators is faster than the previous Delta wave.

   

4. We are also mixing individual-level implications with population-level implications. Immunity may largely protect us against Omicron. But people do still end up in the hospital. Four out of 42 patients (9%) in the South Africa hospital needed intensive care. A small percentage can add up quickly when we are talking about an incredibly fast virus moving through 330,000,000 people in the United States.

5. And finally, something that I haven’t even see get mentioned is morbidity. Long COVID is less prevalent among vaccinated (see my previous post here), but it does still happen. Just ask anyone with long COVID. You don’t want it.

Differentiating all these factors is incredibly important to determining whether Omicron is more severe. Untangling will take time. And we haven’t had that time yet.

Bottom Line

There’s a good chance Omicron will outcompete Delta in the United States. This coupled this with the high unvaccinated rate and lab data showing partial vaccine immunity will result in a substantial Winter wave. The rate of breakthrough cases will be higher, but I’m hopeful that boosters will largely keep people out of the hospital.

We’re all exhausted. The scientists. The healthcare workers. The parents. The pharmacists. The teachers. Everyone. But the virus isn’t. And it won’t be until we all take it seriously. Wear a good mask. Ventilate spaces. Test, test, test. And, for the love of all things, go get your vaccine and/or booster.

Love, YLE

A few random notes:

• The U.S. Chambers of Commerce invited me back to answer more Omicron questions on Thursday at 4pm Eastern. Register here. It will be recorded, too.

• Those looking for a good mask can start here— a fantastic database of masks tested for effectiveness. Here is the kids’ mask database.

• Yes, antigen tests work against Omicron. They test for another part of the virus—they do not test against the spike protein. They still work, so please use them.

CONSUMER WATCH

The Chase consumer card spending tracker, updated through November 30, points to a very strong month, ending softly.

Spending on discretionary goods was particularly strong. J.P. Morgan’s calculations give 2.4% growth in November control sales, the strongest growth rate since March and 50% stronger than October’s 1.6% actual growth.  So far, so good, but did November borrow from December?

This is from the National Retail Federation:

• In total, 179.8 million unique shoppers made in-store and online purchases during the holiday weekend, exceeding NRF’s initial expectations by over 21 million. The figure compares with 186.4 million shoppers in 2020 and is in line with the average of the last four years. As retailers continue to extend deals and other offers into October and early November, half (49 percent) of shoppers said they took advantage of early holiday sales or promotions before Thanksgiving this year.
• Thanksgiving weekend shoppers spent an average of $301.27 on holiday-related purchases such as gifts, décor, apparel and toys. This is down slightly from $311.75 in 2020.
• The vast majority (84 percent) of holiday shoppers reported they have already started shopping and have completed more than half (52 percent) of their holiday purchases on average. 

From Axios:

Spending on Cyber Monday falls 1.4%. (…) During Cyber Week, which begins on Thanksgiving and ends on Cyber Monday, spending totaled $33.9 billion, which is also a decrease of 1.4%. Spending climbed in the days before the Thanksgiving holiday amidst a drumbeat of coverage about supply chain snarls, spurring consumers to start shopping early. Shoppers have shelled out $109.8 billion since November 1, up 11.9% versus the same period a year prior.

Inflation, Falling Unemployment Prompt Fed Pivot The Fed is making plans to accelerate the winding down of its stimulus program, ending by March instead of June and opening the door to raising rates next spring rather than later in the year.

The abrupt shift opens the door to the Fed raising interest rates next spring rather than later in the year to curb inflation, marking a significant policy pivot by Chairman Jerome Powell shortly after President Biden offered him a second four-year term leading the central bank.

With this move, Mr. Powell would be focusing the Fed’s efforts more on restraining inflation and less on encouraging employment to return to its pre-pandemic levels. Inflation has surged this year—to 5% in October from a year earlier, according to the Fed’s preferred gauge—amid strong demand for goods and services and supply-chain bottlenecks associated with reopening the economy. (…)

The Fed still expects inflation to decline next year, but Mr. Powell indicated the central bank doesn’t want to bet the farm on it. “Almost all forecasters do expect that inflation will be coming down meaningfully in the second half of next year,” he said. “The point is we can’t act as though we’re sure of that.” (…)

“We said in the new framework that on inflation, we would wait until we saw the whites in their eyes before firing…and now we’ve seen them,” said Fed governor Randal Quarles in an interview last Wednesday. “We never said we’d let the army march over us.” (…)

“If we didn’t have higher inflation readings, you might let the economy go a little bit more to see if we can get through Covid and have those [unemployed] individuals come back,” said San Francisco Fed President Mary Daly during a webinar last Thursday. “But the same people who might be sidelined and not getting jobs, they’re also paying higher prices. And inflation is a pretty regressive tax.”

We’ve all been warned.

Nordea:

Turning to this week’s US CPI print, we expect core inflation to print >5% with risk to the upside, while headline inflation prints around 6.7%.

US core CPI model built on OER & used car inflation

Looking into 2022 we see broad wage growth pushing inflation further up. Wage growth has a clear spillover to higher median CPI with a time lag of 6-9 months (with a correlation of >70% since 1984), which is exactly the kind of inflation that the Fed will have a harder time to refute.

Broad wage growth leads to higher median CPI

While we cannot expect car prices to rise well into 2022, we expect OER – the largest CPI component – to slowly but surely push inflation higher in 2022. Our model is broadly in line with house price forecasts from Fannie Mae and OER inflation projections from Dallas Fed. The main difference is that we see higher risks of front-loaded inflation. According to our models the yearly contribution to core inflation from the OER component could be as large as 1.7%.

Our model hints of 5-6% OER as soon as in 1H 2022

Inflation Pressure Hits New Warehouse Leases Landlords are incorporating higher prices into increasingly expensive contracts, extending the rising costs in supply chains

(…) Prices to lease industrial properties are up an average of 25% over the rates at the end of five-year contracts that expired this year, according to a report real-estate firm CBRE Group Inc. released Monday. (…)

The U.S. national average vacancy rate fell to 3.6% in the third quarter, down from 4.3% the year before, and the lowest level in data going back to 2002, CBRE said in an earlier report. Space is especially tight at key distribution hubs like the Inland Empire in Southern California, where the vacancy rate recently dipped to 0.7%.

CBRE says leasing rates in the third quarter were up 10.4% year-over-year. (…) Rents to replace leases expiring this year in central New Jersey, Philadelphia and the Inland Empire near the ports of Los Angeles and Long Beach were more than 60% higher than rates for leases that started in 2016. (…)

“Transitory” inflation indeed!

• Lumber prices surge amid B.C. flooding, higher U.S. duties Cash prices jumped US$100 last week to US$745 for 1,000 board feet of two-by-fours made from Western spruce, pine and fir, or SPF. With that 15-per-cent gain, the latest rally has resulted in cash prices soaring 75 per cent over the past 13 weeks.

Hopefully transitory:

(CalculatedRisk)

POINTS OF VIEWS

• Morgan Stanley: “We reiterate our view that tapering is tightening for the markets and it will lead to lower valuations like it always does at this stage of any recovery. How much lower? We forecast S&P 500 forward P/Es to fall to 18x, or approximately 12% below current levels. Obviously, for the more expensive parts of the market, that decline will be larger.” 
• Goldman Sachs: “Investors have drawn parallels between recent equity volatility and 4Q 2018 when the S&P 500 plunged nearly 20%. However, by several measures, the present looks more favorable for equities than three years ago. The annualized pace of US economic growth is nearly double what it was in 2018 (3.0% vs. 6.5%), the nominal Treasury yield is much lower (1.4% vs. 3%), while core PCE is higher (4% vs 2%). The relative value of equities vs. bonds is compelling (32nd %-ile vs. history)”.

The current forward P/E is 21.1x ($216 FW EPS). Core CPI is 4.6%. The Rule of 20 says Fair P/E is 15.4 and Fair Value 3050. Sounds exaggerated? It also did in 2000.

Investors currently don’t care about inflation. Assume they are right and inflation quickly returns to the Fed’s 2% goal. The R20 Fair P/E would then be 18 and Fair Value somewhere between 3600 and 3900.

On Goldman’s assertion that “by several measures, the present looks more favorable for equities than three years ago”, I would respectfully mention that the S&P 500 Index was trading at 19x in September 2018 (now 23.0) and the R20 P/E was 21.2 (now 27.6). Equities troughed in December 2018 at a P/E of 14.6 and a R20 P/E of 16.8. Inflation was stable at 2.2% then. Trailing EPS jumped 8% during those 3 months.

Some people seem to care about something:

Meanwhile, watch the moving averages:

China Evergrande’s Managed Restructuring Is Under Way; Shares Hit 11-Year Low The developer’s bonds also fell to historic lows, after Chinese authorities stepped up their involvement in its affairs and the company moved closer to a reorganization of its hefty international debt.

(…) Evergrande said Monday that “in view of the operations and financial challenges” it is facing, its board has set up a risk-management committee whose members include representatives from several state-owned enterprises. (…)

The containment process has begun…

As of end-June, Evergrande had total debts of the equivalent of roughly $89 billion, out of a broader set of liabilities topping more than $300 billion. Most of its debt is onshore but it has nearly $20 billion in offshore bonds.

• China Moves to Boost Slowing Economy China’s central bank said it would reduce the amount of money banks are required to set aside as it moved to stimulate a slowing economy that has been weighed down by a slump in the property market.

(…) On Monday, the People’s Bank of China said it would reduce the reserve requirement ratio for banks by 0.5 percentage point to 8.4%, starting Dec. 15, which would unleash about 1.2 trillion yuan, or $188.3 billion, into the financial system. It was the second such move this year after an earlier one in July.

Separately on Monday, the Communist Party’s top decision-making body said that stability is the “top priority” for China’s economy next year, signaling that Beijing will shift toward supporting growth in 2022. (…)

From Markit’s November PMI: “At the composite level, new order growth slowed to a fractional pace that was the slowest for three months.”

• China Increasingly Obscures True State of Its Economy New data restrictions have made it harder for foreigners to get details on what’s happening inside China, including about port activity, supplies and political dissent cases. Companies and governments are left trying to figure out how to engage.

(…) One driving force behind the expanding secrecy is a new data-security law that went into effect on Sept. 1, after Chinese officials grew concerned about the transfer of potentially sensitive data overseas. It subjects almost all data-related activities to government oversight, including their collection, storage, use and transmission.

Since the law was passed, companies in mainland China have grown more reluctant to share information with multinationals in strategic sectors like finance, healthcare, public transportation and infrastructure, according to Jonathan Crompton, a Hong Kong-based lawyer at the law firm Reynolds Porter Chamberlain LLP. (…)

Suppliers of metals like cobalt and lithium used in electronics have grown reluctant to share information with customers outside China, said one executive at a major U.S. technology company. Data the suppliers now consider sensitive includes details like how much of a given metal they have available or what percentage of their supplies are recycled, the person said, making it difficult to plan production and ensure compliance with environmental rules. (…)

In early November, global ship-tracking platforms began to notice disruptions to the flow of location data of vessels in Chinese waters. Some local providers had stopped sharing detailed information of ship positions, citing the new data-security law. A Chinese state media report on Nov. 1 described a nationwide crackdown on local providers of such data, citing national security implications.

While satellite imagery is still available, removing access to more detailed, real-time vessel movements around China makes it difficult for companies to accurately track their shipments to and from the world’s largest exporting nation, said Nikos Psaltopoulos, chief operations officer at Athens-based global maritime analytics company MarineTraffic. It also hinders the ability of financial institutions to gather information on port activity to make accurate macroeconomic predictions on growth and trade, he said. (…)

One of the most dramatic reversals in Beijing’s openness has been in academia—once seen as a beacon of engagement between China and the West. China has steadily closed off Western scholars’ access to research archives and made it more difficult for Chinese universities to host international conferences. (…)

Russia and Ukraine: War or Bluff? By: George Friedman “My bet is this is a bluff. But I wouldn’t bet the house on it.”

Short of buzz!

Source: YCharts

Axios’ Sara Fischer and Felix Salmon write:

At 10:15 on Monday morning, BuzzFeed was worth $1.93 billion. Less than one hour later, at 11:11am, the company had shed 43% of its value and was worth just $1.1 billion.

At the end of its first day as a public company, the market had settled on a valuation of $1.15 billion — for BuzzFeed and HuffPost and Complex. That compares to a valuation of $1.7 billion for BuzzFeed alone when it raised $200 million from NBCU in 2016.

When it started trading after merging with a SPAC named 890 Fifth Avenue, BuzzFeed had just 1.6 million shares trading on the Nasdaq exchange. That’s because 94% of the SPAC’s shareholders had opted to redeem their shares for $10 each, rather than hoping BuzzFeed stock would trade higher than that.