Every year has its hallmarks, which affect global sourcing in a myriad of ways. As 2016 closed, the major developments included consolidation in the container shipping sector, the fallout from Brexit, the rise of populist movements and the many questions surrounding Donald Trump’s impending presidency.
The Q4 retail sourcing report from CBX analyzes the effects of each of these major disruptors as well as a host of other currency, commodity and labor issues. Taken as a whole, the snapshot of the quarter paints a positive picture, heading into the new year.
In the midst of these ups and downs, the report shows growth in manufacturing in several key regions, including the U.S., Europe and China. CBX provides a closer look at the numbers via a matrix of statistics and analysis of purchasing manager indices.
Currency fluctuations were driven by political interests in the fourth quarter, as uncertainty following Brexit, the impending Donald Trump administration in the U.S. and Eurozone elections rippled across borders. The report showcases the year in currency in visual snapshots that capture the dips in the Euro and surges in the U.S. dollar along with each peak and valley along the way with analysis of how the volatility affected the global market.
The findings highlight the comparative wages from one country to the next and even one region within a country. The report shows the most recent data on wages, including spikes resulting from current and future planned minimum wage increases as well as social or political unrest. Overall, wages are increasing, with China representing the higher end of the spectrum, especially in Shanghai and Shenzhen.
The report also gives a comprehensive look at the characteristics beyond currency and wages that factor into a country’s competitiveness, including government regulations, education, trade barriers and infrastructure. These rankings paint a clear picture of what it would be like to work in one country vs another when determining where best to produce or if it might be wise to look at alternate production options.
Following the supply shortages and resulting rate hikes related to the Hanjin Shipping bankruptcy as well as the subsequent consolidation in the sector as companies merged to survive, the container freight rates portion is of particular interest.
Politics again factored into commodity rates. The report singles out copper prices, which increased based on then President-elect Trump’s promise to boost infrastructure. More direct reactions to the political environment are expected going forward. The other main store focused the increase in oil prices, which was a direct result of OPEC’s attempt to increase prices by limiting supply. The report questions whether prices will continue to rise, however, since some oil producing countries may break ranks.
Rubber prices surged, metal rallied, and cotton, wool and hide prices all increased in the quarter. Demand, and therefore prices, for plastic fibers were low, with the exception of nylon, which increased due to raw material costs.