This is the strangest economy

This is the strangest economy – like nothing we have ever seen before.

America

• Inflation is up, but so are the jobs numbers. We added 339,000 jobs to the American economy in May. But many companies, especially in high tech, are laying off people.

• We are officially in a bull market.

• Unemployment is at a 50-year low.

• People are still spending, but the savings rate is climbing.

• Logistics costs have practically returned to normal, after extraordinarily high rates during the pandemic.

• Gas prices are down, even though they typically rise in the summer.

• Interest rates are up, but people are still buying houses.

• Since the beginning of 2022, construction spending on new factories has more than doubled – the highest factory construction since 1993.

• Reshoring is booming, but companies are also considering alternate manufacturing locations in India, Vietnam, Mexico, and other countries.

Analysts say we are sure to have a recession, but there are no signs of it. Nothing is consistent with what we have seen in the past.

This inconsistency is happening worldwide.

China

• China’s exports fell by 7.5% in May compared with a year earlier, while imports fell by 4.5%.

• China’s GDP growth this year is expected to be 5.2% and 5.1% in 2024.

• Beijing has pledged to shore up trade to support the overall economic recovery, but China’s exports have struggled due to weak global demand.

• China is globalizing by sourcing and manufacturing in other countries and shedding low-value manufacturing work to other low-cost countries.

Europe

• Europe is in a slight technical recession with two consecutive quarters of contracting GDP.

• Eurozone economic growth this year is slightly up.

• European consumer spending is down.

• Europe’s higher energy costs are blamed on the War on Ukraine and Russian oil sanctions.

With so much uncertainty and mixed economic signals, it is hard, if not impossible, to see trends or predict what will happen. How can we plan our global supply chains with so many mixed signals?

It is time for supply chain professionals to be very flexible and responsive to anything that may happen. This means developing alternate plans and thinking through various response scenarios. It means developing strategic thinking skills beyond just managing day-to-day operations. It means paying close attention to economic indicators that will affect our businesses and our supply chains.

Strategic thinking used to be the purview of senior executives, but now supply chain professionals must be tacticians as well as strategists. We must learn to think more creatively and broadly about alternatives and develop new plans.

About the Author

Rosemary Coates is the executive director of the Reshoring Institute and the president of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith - How to Avoid and Defend Supply Chain Disputes.  Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about reshoring.
             

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