How are we doing globally?

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I am receiving regular information from Michal Stupavský, CFA, Investment Strategist, Conseq Investment Management, a. s. It is a very interesting read prepared by experts on global financial policy.

And what are the conclusions from this? It’s beyond sad. I quote:

The latest international comparison of electricity prices for industrial enterprises from June last year on the analytical portal Statista clearly shows that the European industrial sector has completely lost global competitiveness.

Thus, for example, in Germany, the industrial heart of Europe, industrial enterprises have to pay approximately twice as high electricity prices compared to the USA, and even three times as high prices compared to China. Therefore, we cannot be surprised that the whole of Europe, and especially Germany, is gradually deindustrializing. For example, the Bloomberg agency brought detailed reports about how many German industrial enterprises in Germany are closing their operations or possibly moving them to the USA or Asia. It is worth noting in this regard that the current German industrial production is at the hardly believable level of 2010 and at the same time 15% below the historical high of 2017.

I see several key reasons for this unfavorable trend. First, the extremely expensive green transition policy (Green deal), second, economic sanctions on Russia, due to which Germany lost cheap supplies of energy raw materials, especially gas, third, the huge German bureaucracy, and finally, fourth, the lack of qualified labor.

The very unfavorable picture of the European industry is also evidenced by the purchasing managers’ indices (PMI), which have been moving for a very long time well below the key threshold of 50 points, which separates the expansion from the contraction of the industrial sector. The latest value of the PMI industrial index for the eurozone is 45.7 points, for Germany 41.6 points and for the Czech Republic 44.3 points. At the same time, the situation in the USA and China is diametrically different. The industrial PMI in the US is 52.5 points (S&P Global) and 47.8 points (ISM), and in China 49.1 points (official index) and 50.9 points (Caixin index). The European industrial sector is therefore faced with a huge problem, and if the political elites do not wake up in time, the pace of closing European industrial operations will probably gain momentum.