China is now experiencing deflation as its economy struggles with declining exports and imports. Complicating matters further, China’s official purchasing manager index (PMI) has declined for four straight months and is now at its lowest level in a year. A prolonged housing crisis from overbuilding is also contributing to the deflationary pressure in China.
This Chinese deflation is expected to be exported to the U.S., especially in the Producer Price Index (PPI) that will be announced on Friday due to falling goods prices. The Consumer Price Index (CPI) will be announced on Thursday and might rise slightly due to higher energy prices.
Speaking of deflation, the inventory of electric vehicles (EV) in inventory continues to steadily rise. No wonder Tesla is curtailing its production in the third quarter. According to Car Gurus, there are 12,036 Ford Mach-Es, 9,356 VW ID.4s, 5,805 Hyundai Ioniq 5s, 3,706 Hyundai Ioniq 6s, 2,347 Ford F-150 Lightnings, 2,155 Audi e-trons, 2,055 Kia Niros, 1,617 Chevrolet Bolts and 1,018 Cadillac LYRIQs sitting on dealer lots.
Other than Tesla’s Cybertruck that is designed for the Zombie Apocalypse according to Elon Musk, the other fast selling EV is expected to be the VW’s ID Buzz when it arrives in 2024. However, after these two EV models that look different than most vehicles, EVs sales continue to struggle.
As more EV production moves to Mexico as GM shuts down the Bolt’s Orion manufacturing plant in Michigan to throttle up on the Equinox EV production in Mexico, the UAW remains worried about their job security, since EVs require approximately 70% less parts to assemble. The UAW is asking up to a 46% compensation increase for its 150,000 workers with the Big 3 Detroit auto manufacturers. Specifically, the UAW wants a 20% general wage increase, plus a 5% wage increase every September through 2027. Obviously, there is a big push back from the Big 3, so a UAW strike maybe forthcoming.
U.S. acting Labor Secretary, Julie Su (she does not have the votes to become confirmed in the Senate), is becoming a problem, since she is talking about a decelerating labor market, while ADP is reporting much more robust job growth in the past couple months. Especially alarming is that ADP is reporting big manufacturing losses in the past couple months, while the Labor Department is refusing to expose manufacturing job losses. Hmm. I think it is safe to say that the Labor Department is likely manipulating the payroll figures through seasonal adjustments.
Julie Su is most famous for being the lead attorney in the El Monte Thai Garment Slavery Case that pursued a legal theory that held manufacturers responsible for the wage theft, as well as the operators who actually kept the garment workers captive. She and other activists also petitioned for the workers to be able to stay in the U.S. under a visa program for those who cooperate with the government in criminal trials.
When Julie Su was the head of California’s Division of Labor Standards Enforcement, she came under criticism when over a million legitimate unemployment applicants during the Covid-19 work restrictions had their unemployment benefits delayed or frozen, due to the fact that up to $31 billion in unemployment benefits were sent to fraudulent claimants (including California inmates and domestic as well as international crime rings). In other words, if Julie Su can royally mess up unemployment benefits, I suspect that she can also manipulate the monthly payroll reports to mask the manufacturing job losses that the Biden Administration wants to mask.
Here is what is really happening. The onshoring of semiconductor manufacturing and battery production that the Biden Administration has been pushing has not been going well. As an example, Taiwan Semiconductor has delayed the opening of its new plant in Arizona until 2025, while GM’s Mary Barra admitted that its Ultium platform is having an acute supplier problems, so its battery packs are being manually assembled, which is why GM only made 47 Hummer EVs in the first half of 2023. Furthermore, if there is an EV manufacturing boom, it is really in Mexico as Ford, GM and Tesla are all boosting their EV production south of the border.
Essentially, the Biden Administration has nothing to brag about its onshoring efforts in the 2024 Presidential race and, in my opinion, is purposely trying to mask recent manufacturing losses after the Institute of Supply Management (ISM) reported eight straight months that U.S. manufacturing activity contracted (below an ISM reading of 50). However, if the UAW goes on strike, then the Labor Department can suddenly report the thousands of manufacturing job losses that it has suppressed in recent months, since it will be overshadowed by the UAW strike. So I for one, am expecting a UAW strike, because it will to help the Biden Administration’s manipulation of the payroll data via the Labor Department under its controversial new leader, who cannot even get Senate confirmation.
