Structural crisis: severe imbalances along the production and sales chain

Time period: 17 – 23 July 2021

Top news story. The interval between ordering and delivery of the semiconductor was 19.3 weeks in June. According to Susquehanna Financial Group, this is a week and a half longer than in May.

Waiting time for chip delivery from the moment of order. Data: Susquehanna Financial Group. Source: Bloomberg

This is a record time since at least 2017, when the company began to maintain similar statistics. The company itself provides many reasons for this effect (trade war, mining cryptocurrency, coronavirus disease, and disruption of logistics and production chains), but we note that this is a typical situation for a structural crisis. The supply-demand mismatch and the dependence of aggregate demand on grants (see the previous Review), in the face of the first economic problems, create huge imbalances along the entire production and sales chain. More details can be read in M. Khazin’s book “Reminiscences about the Future. Ideas of a New Economy” (in English), for the time being, however, we are merely noting that the effects will occur fairly quickly in virtually all sectors of the global economy.


PPI (Producer Price Index) of Germany + 8.5% per year, 40-year record:

Building permits in the United States -5.1% per month – the third negative value in a row and the eight-month low:

United States Building Permits

US housing market index in July at 11-month low due to high cost of building materials:

United States Nahb Housing Market Index

Mortgage applications in the United States resumed their decline after the previous week’s rebound:

United States MBA Mortgage Applications

Existing home sales in the US are near the annual low – prices are to blame (+ 23.4% per year):

United States Existing Home Sales

The price of new housing in Canada is 11.9% per year – a long-term record:

Canada New Housing Price Index

The British budget deficit remains huge:

United Kingdom Public Sector Net Borrowing

Initial jobless claims in the United States are the highest in 2 months:

The Central Bank of China did not change monetary policy, but the authorities lowered the reserve rate for banks.

The Central Bank of Indonesia left everything as it was, as did the Central Bank of South Africa.

The ECB changed the terms of the rate hike to follow the Fed – only if inflation outstrips the target for a long time; bond purchases remain sharply elevated.

But the Bank of Russia raised the rate by 100 points to 6.5%. In a situation where the main cause of inflation in a country is its dependence on imports (“cost inflation”), such a decision seems odd at best.

Preliminary PMI business index data were released. They are generally optimistic, for example in the US data such as: composite index PMI, preliminary for July: 59.7; June: 63.7.
PMI Index in the service sector, for July: preliminary: 59.8; projected: 64.5; June: 64.6.
PMI index in the manufacturing sector, preliminary for July: 63.1; projected: 62.0; June: 62.1.
These figures contradict those given in the previous section (which are rather pessimistic), but it should be borne in mind that the indicator is of an expert nature and is heavily dependent on prices (the higher they are, the higher the figure). It is therefore not desirable to use it to describe economic reality in the current high inflation situation.
A similar situation exists in other countries, such as Germany: PMI index in the manufacturing sector, preliminary for July: 65.6; projected: 64.1; June: 65.1.
PMI index in the service sector, preliminary for July: 62.2; projected: 59.5; June: 57.5.
Composite index PMI, preliminary for July: 62.5; projected: 60.7; June: 60.1.
The situation is similar in France.
In general, it can be said that, as always in a situation of structural crisis, any expert judgement is becoming increasingly inadequate, as the models on which experts rely become more and more distant from reality. And it makes it very difficult for managers and entrepreneurs to make objective, informed decisions.
We wish all our subscribers a pleasant weekend and good summer weather, without floods and other cataclysms!


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