Monday, August 3, 2015

World Trade: Seen and Unseen

So comes a review that world trade is flat and faltering:
An interesting, if short, note on woeful state of global trade flows from Fitch (link here).The key point is that:
  1. Subject to all the talk about the Global recovery gaining momentum; and
  1. Under the conditions of unprecedented past (and ongoing) monetary policy accommodation around the world’
global trade remains severely compressed from mid-2011 forward.
Note the drop is mass merchandise, not specialty goods, as I have pointed out here before.

Next comes a report that ocean freight rates are plunging. It does not matter if ocean freight rates are cheaper for Sears and McDonalds when their customers don't want what they sell.  On the other hand, with specialty goods, as costs fall, you need not cut prices as fast as the costs fall, so all this deflation makes for wider profits as your costs fall faster than you reduce your prices.  In this way you get ever richer as your customers pay ever less.  Deflation is the ideal, and it is here to stay.

Get your business going!

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Anonymous said...

Hi John,

Can foreign manufacturers and suppliers require higher (or maybe even lower?) than usual minimum production product runs due to deflation?

John Wiley Spiers said...

Not sure qtys would change at all....