Productive Shifts
Pfäffikon SZ, Switzerland – Investors measure the state of the economy with different parameters. It is a fact that some features of the economy are so stretched that several investors call into question such developments. Also, some parameters seem to be developing differently than previously. Recently, the U.S. has published disappointing production figures. The production figure is often underestimated by investors and is a parameter that is changing.
Change
The world is changing at a rapid pace. The emergence of the “Millennials” and the aging of the ‘baby boomer’ alone creates major shifts in the economy. Of course, companies are trying to react to these developments, but that’s easier said than done. On the one hand, companies boost margins and on the other hand they often leave much less productive employees on the payroll. Working at home is also having an impact on the productivity, and also provides for shifts in the economy.
Services
In any case, it is clear that, particularly in the U.S., the service factor is playing an increasing role in the economy. Critical investors believe that this is a negative development for the long term. After all, a country that produces less and relies increasingly on services will be less able to grow substantially. Noteworthy is that the newly incensed employment figure from the U.S. only confirms that the increased number of (poorly paid) jobs does not contribute to growth. Meanwhile, the ‘millennials’ are playing their games, but if that keeps running a long-term economy is still questionable.
Space
It seems that there is enough space for extra productivity in the world’s largest economy, but that this ––for whatever reason–– remains untapped. Additionally, it is striking that the industrial productivity lags behind since the final expansion in the U.S. This confirms an image in which companies have plenty of room for expansion but apparently are not able to bring their goods to the man in the street.
The shifts in production thus raise more questions than it gives answers. In many shopping streets we are witnessing shifts, but unfortunately, a clear answer is not to give yet. The fact remains that many companies show a healthy profit margin, which does not suit the neutral and even slightly crumbling image of the overall economy. It takes more time and research to understand productive shifts better.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.
