1. Adam Tooze has a good post on the troubles facing the Chinese economy. He links to an article by Matthew Klein.
Homebuilders sold an average of 156mn sq m a month of residential floor space from April to June 2021. This year in the same period, Chinese developers have sold just 106mn sq m a month. The plunge in demand has flowed through to new building, with the amount of “residential floor space started” in April-June 2022 down by nearly half compared to last year. The pace of homebuilding has not been this slow since 2009... According to China’s ministry of finance, local government revenues from land sales so far this year were 31 per cent lower than in the first six months of 2021... Chinese consumer spending in the first half of 2022 was barely higher than in the first half of 2021 after accounting for inflation, and is now running more than 10 per cent below the pre-pandemic trend. Chinese oil refiners have been processing 10 per cent less crude oil since April compared with last spring thanks to the plunge in petrol demand. Electricity consumption, which had been expanding by about 7 per cent a year before the pandemic, is now growing just 2 per cent... In dollar terms, spending on imports has been flat since the end of last year. Factor in rising prices, and China’s real import demand is down about 8 per cent since the lockdowns began, according to estimates from the Netherlands Bureau for Economic Policy Analysis.
At a time when the global economy is grappling with supply constraints and rising inflation, lower demand from China is very helpful.
Chinese debt to GDP ratio has doubled since 2013, with the biggest contributor being the local government financing vehicles, who in turn leverage real estate to raise debt.
2. Energy market risk diversification illustration
Berlin Brandenburg airport, newly opened after decades of delays, depends heavily for its kerosene jet fuel on the nearby Russian-owned Schwedt oil refinery. Authorities have been warning that a complete German embargo on Russian oil will threaten the airport’s operations. By contrast Berlin’s former airport, Tegel, was more resilient even during the cold war: a diversification rule meant aeroplane fuel arrived by a variety of means including truck and train.
3. Rana Faroohar points to inequality being a contributor to US consumption spending not declining as much as expected,
To the extent that the wealthy in the US are not yet cutting back on spending, they may be an important and under-explored factor driving the inflation felt by all. The top two-fifths of income distribution in the US accounts for 60 per cent of consumer spending, while the bottom two-fifths accounts for a mere 22 per cent, according to 2020 BLS statistics... The American Enterprise Institute, a right-leaning think-tank, estimated in February that the wealth effect of both asset gains and cash extraction from the refinancing of property (which hasn’t corrected yet, like stocks) represented $900bn, with a consumption impact that started last year and will continue through 2022... when the top quintile of Americans as a whole enjoy 80 per cent of the wealth effect from rising stock and home values (the AEI’s estimate), I suspect it starts to have a real impact on inflation, and on the overall structure of our economy, which over the course of the past 30 years of real falling interest rates has become highly financialised.
4. Businessweek points to the rise in college tuition fees in the US
By weaponising natural gas, Vladimir Putin is under-cutting Russia's strategic leverage over Europe for short-term gains.
6. Ruchir Sharma draws attention to the counter-intuitive point of whether the world can produce robots "fast enough to save the world economy from labour shortages".
Labour shortfalls are at historic highs in advanced economies, including the UK and US. There are now 11.2mn openings for 5.6mn job hunters in the US, the widest gap since the 1950s... The working-age population is shrinking in nearly 40 nations, including most of the major economic powers, up from just two in the early 1980s... underlying demographic trends foretell continuing shortages. Among the hardest hit nations are China, Japan, Germany and South Korea — all are expected to see the working age population drop by at least 400,000 a year through to 2030. Not coincidentally, these countries already host high concentrations of robots, and are rolling out more. Japan’s manufacturers deploy nearly 400 robots per 10,000 workers, up from 300 just four years ago. China, in its top-down way, is heavily subsidising robot makers, aiming to boost their output by 20 per cent a year through 2030. Even at that pace, Bernstein analysts predict, robots cannot fill all the holes in the labour force, which China expects will shrink by 35mn workers in the next three years.
7. Queen Elizabeth's passing away takes away a constant anchor for the last seven decades. This graphic is striking.
8. When we talk in general about inflation, so much is lost in the translation. FT has a superb graphic which looks at how the consumer price inflation in UK in July 2022 varied for different population categories compared to the national CPI average of 8.8%.
9. On the reemergence of unions among US companies, albeit in a different form,
The upstart union, Starbucks Workers United, is one of a new breed of organised labour that has emerged in the US in recent months. The movement has traditionally been dominated by large, sector-specific unions such as the United Auto Workers, the Service Employees International Union and the Teamsters, which have maximised their scale and reach to fight for better conditions for workers. Instead, the Starbucks employees have taken a different approach — forming smaller groups led by workers on a store by store basis, in the hope that it will build to a broader movement. The strategy has attracted a younger, more politically engaged type of worker, and has helped unions gain a foothold not just in the coffee giant, but also in Amazon, Chipotle and others following a similar path...
Since baristas in Buffalo, New York, founded Starbucks Workers United last December, some 233 other locations have followed suit. Workers at Amazon, Chipotle, and Trader Joe’s have all cited the union’s speedy rollout as the inspiration behind their own drives. But none of the new Starbucks unions have successfully completed what labour scholars say is the most important step on the path to unionisation: negotiating a collective bargaining agreement, the legally binding contract that unions rely upon to improve conditions for its members.
10. Mahesh Vyas points to interesting trends in India's labour market - increasingly ageing and less educated workforce.
Estimates from CMIE’s Consumer Pyramids Household Survey (CPHS) suggest that in 2016-17, 17 per cent of the labour force was of the 15-24-year age. By 2021-22, this proportion had dropped to 13 per cent... In 2016-17, a quarter of the total employment in India was of people below the age of 30. This fell to 21 per cent by 2019-20 and then to 18 per cent by 2021-22. The proportion of the workforce in their thirties has also fallen from 25 per cent in 2016-17 to 21 per cent in 2021-22. As a result, what is left in the workforce is mostly people in their forties and fifties. In 2016-17, 42 per cent of the workforce was in their forties and fifties; by 2019-20, this had risen to 51 per cent...A related problem is that the educational qualification of the workforce is deteriorating. The share of graduates and post-graduates increased from 12.5 per cent in 2016-17 to 13.4 per cent by 2017-18. Then it fell to 13.2 per cent in 2018-19 and then to 11.8 per cent in 2019-20. It recovered but only partially to 12.2 per cent... India’s workforce comprises mostly people whose maximum educational qualification is of secondary education (those who cleared their 10th – 12th examinations). They accounted for 28 per cent of the workforce in 2016-17 and in 2021-22, their share went up to 38 per cent. There is a similar increase in people whose maximum education was between 6th and 9th standards. Their share went up from 18 per cent in 2016-17 to 29 per cent in 2021-22.
11. Finally The Ken has a good story on the struggles with the Ayushman Bharat Digital Mission (ABDM), the giant project to introduce electronic health records in India - “unified health system for every citizen and the central verifier of all truths in healthcare”. The article says that the project is being implemented at a cost of $200 million.
I don't think it's a good idea to plunge into such an ambitious project at such scale. This requires very carefully phased out and gradual progress up the electronic medical records value chain. It'll probably require at least decade to even have the rudiments of an effective EMR system in place. And it'll cost several multiples of the $200 m, besides serious engagement on its adoption down the public health referral chain.
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