Manufacturers Grind to a Halt in China as Lockdowns Expand Manufacturers including suppliers to Apple and Tesla are struggling to keep some of their China operations going as extended and widening Covid-19 lockdowns choke off supplies and clog up truck routes and ports.
(…) What looked like a hiccup for many companies is now threatening to be an extensive shutdown, rattling service businesses as well as manufacturers. Activity in China’s services sector tumbled in March at its fastest pace since the onset of the pandemic.
More than half of U.S. multinational companies in China have reduced their annual revenue projections following the latest outbreak in Shanghai, the American Chamber of Commerce in Beijing and Shanghai has said, citing a recent survey of members. More than 80% of manufacturers reported slowed or reduced production.
Shanghai’s cases continue to increase despite a full citywide lockdown imposed April 1, with almost 20,000 new local infections recorded Wednesday compared with just over 17,000 the previous day, according to health officials. Full or partial lockdowns have spread to other cities surrounding Shanghai, including Jiaxing, home to many apparel makers.
About 30 miles away from Shanghai, a three-day lockdown was imposed late Tuesday in Kunshan, a city of two million people that is a crucial manufacturing base for electronics components used in mobile phones, computers and automobiles, industrial experts said. (…)
“Covid is everywhere,” one truck driver wrote on a popular online industry forum. (…)
“It doesn’t bode well for an easing of supply chain bottlenecks anytime over the next few weeks or indeed months,” Mr. Huxley said. “It’s anything from electronics goods, domestic goods, furniture—you name a household brand or chain store in the U.S. or Europe and you can bet they will have something stuck in a factory or on a truck coming out of Shanghai.”
U.S. Jobless Claims Fall to 166,000, Lowest Level Since 1968 Decline in initial claims for jobless benefits reflects strong demand for workers
Initial jobless claims, a proxy for layoffs, fell to 166,000 during the week that ended on April 2, compared with a revised 171,000 the prior week [from 202k], the Labor Department said Thursday. The weekly total was the lowest since November 1968, when the labor force was less than half of its current size.
The four-week average for claims, which smooths out volatility, fell to 170,000. (…)
Walmart Offers $110,000 Starting Pay to Lure Truck Drivers To keep its supply chain humming, the retailer is raising starting salaries for truck drivers and expanding a training program that enables its employees to enter the field.
The company, in a bid to keep its supply chain running smoothly, is setting starting salaries for its truck drivers between $95,000 and $110,000 a year, up from an average starting salary of $87,000, said a Walmart spokeswoman. (…) In job postings on Walmart’s website, the company said it offers quarterly safety bonuses in addition to sign-on bonuses of $8,000 or more for new truck drivers in some locations. (…)
In the U.S., median annual pay for heavy-truck and tractor-trailer drivers was $47,130 in 2020, the most recent annual data available, according to the Bureau of Labor Statistics, and has increased by about 3% to 4% annually since 2016. (…)
Last month, the trucking industry lost 4,900 jobs, the first monthly decline in nearly two years, federal labor statistics show. (…)
Walmart hired 7,000 drivers for its internal fleet during the past two years, last year hiring 4,500, the most in company history, said a spokeswoman. It employs around 12,000 truck drivers total.
“You can pull up job postings and there are lots of sign-on bonuses and shiny objects out there, and we want to make sure our associates are taken care of,” Ms. Sprague said. (…)
“I think it probably signals that some of the inflation pressures that are coming from transportation are now built in.” (…)
Walmart’s efforts to build out its trucking fleet illustrate how companies are taking on more responsibilities within their supply chains and, in some cases, taking over tasks once handled by third parties. (…)
Target Corp. is building new regional distribution centers and a network of sorting sites to speed goods through its supply chain. BJ’s Wholesale Club Holdings Inc. reached a deal in January to buy four distribution centers and the trucking fleets tied to the sites from a closely held logistics company. (…)
More on that from a friendly reader who notes that “I fear that without the detailed explanation that John Oliver provided, your readers will be left with the wrong impression, namely that trucking is a high paying profession (which it is not)….” Trucks: Last Week Tonight with John Oliver (HBO) – YouTube
- How Drones and Robots With A.I. Will Deliver Your Online Order Fast
- Alphabet’s Wing to Launch Drone Delivery in Dallas-Fort Worth Area
Food Prices Jump Most on Record as War Sparks Supply Chaos with a United Nations’ index of world costs soaring another 13% last month. (…)
The FAO’s gauge of global prices has jumped about 75% since mid-2020, eclipsing levels seen in 2008 and 2011 that contributed to global food crises. Last month’s surge helped prices round out a seventh straight quarterly gain, the longest such run since 2008.
The UN has warned that prices could still climb much more. (…)
The problems will also drag into the next season. Ukraine planted its wheat months before the war erupted, and the FAO expects at least 20% to go uncollected because of destruction, constrained access to fields or a lack of resources for harvests. Russian production could be affected by challenges importing agricultural inputs, it said. (…)
U.S. Consumer Credit Usage Strengthens in February
Consumer credit outstanding increased by a record $41.8 billion (6.5% y/y) during February after rising $8.9 billion in January, revised from $6.8 billion. The ratio of consumer credit outstanding-to-disposable personal income edged higher m/m to 24.4% in February, the highest level since March 2020.
Revolving consumer credit balances rose $18.0 billion (9.7% y/y) in February after growing $3.5 billion in January. (…)
Matching the record set last May, nonrevolving credit usage grew $23.8 billion (5.6% y/y) in February following a $5.4 billion January increase. (…)
John Authers: What You’re Expecting From Earnings Won’t Happen With a war on and interest rates rising quickly, you’d think the profit outlook for companies for 2022 would be worsening. Think again.
(…) Bloomberg’s “BEst” earnings estimate for the S&P 500 for the whole of this year has risen since Jan. 1. This doesn’t happen often. Over the last 10 years, estimates for the complete 12 months have fallen seven times by this stage. The two years before this one that saw rises could both be attributed to exceptional circumstances — the surprisingly swift recovery from the pandemic last year, and the impact of the Trump tax reform, enacted in the closing days of 2017, in 2018. (…)
Perhaps more surprising still, earnings estimates for the FTSE EuroFirst 300, covering the companies based in a continent where a war has broken out, have risen even more. They have increased almost as impressively as last year. In each of the previous eight years, earnings estimates had fallen at this point. (…)
Fourth-quarter estimates have gained almost 4% since the turn of the year:
(…) analysts are well-connected and well-informed, and their predictions tend to be directionally accurate. They see further earnings power ahead.
Hmmm…John, let’s look at the facts from Ed Yardeni’s work, keeping in mind that 2018 saw big tax cuts and that 2021 was saved by governments:
During my years on the buy side (1984 to 2009), conventional wisdom was that aggregate earnings estimates tended to prove 10-15% too optimistic 12 months out.
This next chart plots the number of positive revisions as a % of all estimates:
More recently, analysts have been reducing their estimates in 7 of the S&P 500 11 sectors. Energy estimates have been particularly boosted.
Corporate guidance has also worsened:
Note that the last 25 pre-announcements were decidedly bad: 20 down, 4 up, a 5.0 N/P ratio.