How Car Shortages Are Putting the World's Economy at Risk - AIADA

The AIADA featured a NY Times story that worries us.

Turmoil in the auto industry, a powerful engine of the global economy, is threatening decline and sending tremors through companies and communities that depend on carmakers for money and jobs.

For every car or truck that does not roll off an assembly line In the US, Canada, China, Germany, Japan, South Korea, Mexico, Italy, France, UK, Australia, Spain, Russia, India, Brazil, Thailand and others, local jobs are in jeopardy.

The auto industry accounts for about 3 percent of global economic output, and in carmaking countries like Germany, Mexico, Japan, or South Korea, or states like Michigan, the percentage is much higher. A slowdown in automaking can leave scars that take years to recover from.

Carmakers have been able to blunt some of the sting by raising prices, passing on some of the pain to car buyers. The pain is falling hardest on workers and anyone in need of an affordable car.

Auto companies have been allocating scarce chips to high-end and other vehicles that generate the most profit, leading to long waits for less expensive vehicles.

Used car prices are skyrocketing because of the lack of new cars.

Read more here (Source: The New York Times).

Worsening Shortages, High Prices Restrain U.S. Manufacturing Activity U.S. manufacturing activity slowed in October, with all industries reporting record-long lead times for raw materials, indicating that stretched supply chains continued to constrain economic activity early in the fourth quarter, reports Reuters. The Institute for Supply Management (ISM) survey on Monday also hinted at some moderation in demand amid surging prices, with a measure of new orders dropping to a 16-month low. Still, demand remains strong as retail inventories continue to be depressed, which should keep manufacturing humming. "Stress in U.S. supply chains isn't abating, lending downside risk to our forecast for GDP growth in the near term and a clear upside risk to the forecast for inflation," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. The motor vehicle industry has been the hardest hit amid a global semiconductor shortage. Transportation equipment manufacturers in the ISM survey said they had diverted chips "to our higher-margin vehicles and stopped or limited the lower-margin vehicle production schedules." Read more here (Source: Reuters).