To The Moon

Supply Chain is well said to be the blood of the economy. To bring goods and services to the customers, this has to go through some supply chain services.

For this to be appreciated, let us look at the import, export and balance of trade (export less import) for the USA.

For June 2023, exports total $247.483B

For June 2023, total import is $312.98B

thus, the balance of trade for the month ending June 2023 stands at -$65.497B (negative). This implies that the value of imports is more than the value of exports.

For Aug 2023, the PMI are 51.00, 47.00 and 50.40 for services, manufacturing and composite respectively. Composite PMI refers to the combination of both services and manufacturing PMI. This implies that the manufacturing sector is contracting whereas the services sector expands.

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From the LMI index and its detailed explanation, there is no "urgency" to hire for the coming peak season. This could imply either there are sufficient resources, a lack of demand or both. The LMI has been falling since January 2023.

Forward indicators of import - Trans-Pacific booking

The USA is an economy driven largely by consumption. The more import can imply more consumption. China is one of the biggest exporters to the USA. We can use the Trans-Pacific sea freight container booking as an early indicator representing consumption in the USA.

Some of the key "sales dates" include the Thanksgiving weekend (23 - 27 November 2023) including Black Friday & Cyber Monday sales. This shopping continues until Christmas in Dec 2023. In order for the goods to be available for distribution within the USA, the goods should arrive by October 2023. It generally takes between 45 to 60 days for the vessel to complete the Trans-Pacific voyage. By now, the orders should be placed with China factories so that they can be produced, transported to the ports and shipped out soon.

With the need to complete the various shipping and customs documentation, we should know by September the volume of shipments setting sail to the US from Asia. We are expecting a "usual" year-end peak. Knowing this data helps to provide an insight into the potential consumption in the US. However, not every item would be sold out and there would be some balance inventory. Some of the buyers would have ordered earlier to avoid congestion at those ports. Some of the sellers may offer some of the inventory at a discount to encourage sales.

By Q3/2023, we will be able to have a forecast of the consumption in the following quarter. This is where we can derive some understanding of the state of the economy. Ideally, both PMI and LMI should see some upticks. Let us monitor with caution.

‌@TigerStars  ‌

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