November 2019 Volume 1

ECONOMIC UPDATE

newer used truck purchases or delaying new orders until backlogs were worked through. Lastly, there’s just a lot of uncertainty about what next year will bring. In many cases, we could have a much more robust economic environment for the transportation sector if we get strong sell-through during the peak retail season. Inventory rebuilding activity would boost everything from transportation activity to manufacturing, raw material demand, etc. The flip-side is that global economic weakness continues, and we see continued deceleration. If that’s the case, then the transportation sector will swoon along with everything else. Watching Some Developing Hot Spots Around the World There is a small uprising in several countries, starting as protests, that we need to be at least aware of. Although they may not develop into larger moments of civil unrest, there is some concern that there is a broader movement of some sort taking place as countries around the world succumb to tough economic pressure. There are a number of countries undergoing some protests and struggles amid rising inflation and a sluggish global manufacturing sector. Consider the notion that we have been watching and reporting on slowing global manufacturing since early Q2 of 2018. Many of the countries we were watching at the time have just now seen their manufacturing sectors start to “bottom out”. Perhaps. If you are a worker in many of those countries, you have watched your wages fall, unemployment rise, and inflationary prices for your goods go up (generally). That’s exactly what has pushed Chile into a state of emergency and has forced its President to use the military to squash protests and riots. Bloomberg and many others will point out that this is a dangerous scenario for the world because Chile is often heralded for being among the most affluent countries in South America. Their point is that if it can happen in Chile, it can happen anywhere. Riots are taking place in Hong Kong of course, but also Lebanon; Egypt; Barcelona, Spain; Haiti, of course Venezuela, and others. There are also sounds of unrest developing in a number of more developed nations – and all of it is largely economically motivated. One of the culprits is the US dollar. The chart below shows the TradeWeighted US dollar index and you can see that it just hit all-time highs against a broad set of global currencies. That pushes up the cost of items across the board in many countries – especially third world and developing countries that rely on imports of many of their products.

The BlackOwl Report: An Executive Intelligence Brief Confidential – Armada Executive Intelligence Brief – Confidential - 5 - We still don’t see inflation in food prices. The FAOWorld Food Price Index is still staying fairly steady, but if you look at the yellow line below which is the inflation-adjusted food price index, we are seeing it remain a bit higher than it was in 2014-2015, but weaker than the 2011 food price spike era that led to the Arab Spring.

Many citizens around the world have had all that they can take of the current downturn. Again, some of those countries are into their 16 month of a manufacturing slowdown. Europe has been embroiled in Brexit negotiations and battles for 3 years – it’s in a state of Limbo – literally. That leads me to one other point, watch Europe a bit and watch what happens when the rest of the EU gets wind of what’s happening in the UK and the fact that they can’t figure out what they want to do. European citizens are also going to start reacting to the indecision and they know that it is depressing their economic fortunes. We could start to see a little backlash against the UK from EU member nations, which could also start to increase tensions. That would especially be the case in Ireland where both history and current situational dynamics could easily cause tempers to boil. This is not a “global economic moment” that we have to worry about – for now. It’s isolated. But just like the Arab Spring that ultimately toppled 4 Governments, it sometimes doesn’t take much in a modern world where Social Media can help fuel tempers and rally action.

Chris Kuehl, Ph.D., is FIA’s Economist and co-founder of Armada Corporate Intelligence. You can write to Chris at info@forging.org. Learn more about Armada at www.armadaci.com

FIA MAGAZINE | NOVEMBER 2019 24