Analyzing Economic Indicators

India’s services sector has left behind the US, China, and the UK! Here is how– You see, India’s services PMI for January came in at 61.8. While the US, China, and UK’s services PMI stood at 52.5, 52.7, and  54.3 respectively. This means the services sector is performing far better in India than in these countries. But wait, what is PMI? It stands for the Purchasing Managers Index. It is an economic indicator that helps us understand the ongoing trends of a country's private sector. Alright, but how is the data collected to understand these trends? You see, every month S&P Global’s subsidiary IHS Markit rolls out a survey to managers in the services and manufacturing sectors. This survey is filled with questions about how the business landscape has changed from the previous month. Based on their responses, IHS compiles an index which could range between 0-100. Now, if this number is below 50, it means the economy is on a contraction spree. On the flip side, if the PMI crosses the 50-mark — it signals economic expansion. And, a higher rating on the index means stronger growth in the sector as compared to others. That is why we said India’s services sector is growing better than the US, China, and the UK. But it does not end just there! India's services PMI has been cruising above the 50-mark for 30 months straight. The service sector contributes over 50% to India's GDP, making it a true powerhouse in the economic landscape. As a founder of a startup that contributes to the service sector of India, this development makes me feel extremely proud!   Do you think we will see similar growth in the coming months too? Let us know in the comments and follow Finshots for more!

Despite claims that the freight recession is over, those of you who follow the public less-than-truckload (LTL) carriers note that most LTL outfits have been reporting declining year-over-year volumes for October and November (e.g., https://lnkd.in/gJ9Cf-VF). Continued soft volumes in the LTL space stem mostly from ongoing weakness in the industrial economy (e.g., manufacturing). In that regard, I wanted to share one industrial production series, focusing specifically on production of goods made by machine shops, turned products, and screws/nuts/bolts (https://lnkd.in/gnYJjMD8) that does a good job of capturing inflections in freight market cycles. One chart. Thoughts: •These industrial production data show seasonally adjusted physical unit output for this 4-digit industry. Crucially, the BEA estimates only 15% of the consumption of goods belonging to this industry are imported, suggesting an ongoing important role for domestic manufacturing (accounting for ~$70 billion in shipments each year: https://lnkd.in/g4tp2fr8). •As can be seen, during normal freight cycles, upticks of production in this sector correspond quite closely to the onset of bull market pricing cycles in late 2013/early 2014 and mid-2017. Equally, downturns in production correspond to bearish conditions. •The fact production didn’t start dropping till late Q3 2023 (about a year after the freight recession started) can be easily explained by the rampant raw material and labor shortages in 2021 and 2022 creating very large increases in order backlogs (https://lnkd.in/gB4iMH2j) that supported production even after new orders had cooled down. Implication: production by machine shops in the USA merits close monitoring as we move into 2025. An uptick of production would be another indicator that we are exiting the current limbo of flat freight volumes. As it appears this series has finally found its nadir, it will likely take a few more months for production to rise significantly (e.g., late Q1 2025). #supplychain #supplychainmanagement #freight #trucking #manufacturing 

Given the substantial changes in U.S. trade policy and ongoing geopolitical volatility, the latest update of the DHL Global Connectedness Tracker – a research report we published with our partners at NYU Stern School of Business – provides a systematic overview on how recent developments, like rising #tariffs or trade conflicts, are influencing #globaltrade. And for some, the results might be surprising: in the first half of 2025, global trade grew faster than in any half-year since 2010 – except during the temporary rebound following the COVID-19 pandemic. Although recent forecasts have been lowered, global trade is still expected to grow at about the same pace as it did over the past decade – even as trade flows between the U.S. and China have decreased. And contrary to popular belief, trade is not turning inward – goods are traveling farther than ever. As we have also seen in recent months, China’s trade with the rest of the world is a key driver of this development – with its trade with Africa and Southeast Asia expanding rapidly. For us at DHL, these insights are crucial to steer investments and ensure we can provide capacity where our customers need it. The findings of the report can also help businesses identify new global opportunities and customers – underscoring DHL’s role as a trusted partner in connecting markets and enabling growth. I encourage you to use this data-driven report to look beyond the headlines: global trade might be shifting, but it is still growing. https://lnkd.in/ek6cCcfV

Looking at this chart of US trade deficits and surpluses, I can already hear the narrative forming: "The US is losing. We're being taken advantage of. Look at those massive deficits with China, the EU, and Mexico!" But this perspective fundamentally misunderstands global economics in the 21st century. What the headlines miss: 1️⃣ The US dollar is the world’s reserve currency, which means foreign governments and institutions hold large amounts of it. When they hold non-interest-bearing dollars (such as physical currency or certain reserve balances), it effectively serves as an interest-free loan to the United States. Even interest-bearing Treasury securities benefit from lower yields thanks to global demand. This "exorbitant privilege" helps the US finance deficits at remarkably low costs. 2️⃣ The US Treasury market is the largest, most liquid government bond market globally. Foreign entities don't just sell the US goods – they turn around and invest those dollars into the US market, funding American innovation and growth. 3️⃣ The US is a service-based economy, but the US trade deficits we currently hear about in the media are goods only. The US runs significant surpluses in services (think: tech, finance, entertainment, education) that aren't reflected here. 4️⃣ The dollar itself is the US' greatest export. When other countries use USD for transactions, they're effectively paying us for the privilege through seigniorage. 5️⃣ US consumer benefits are enormous. Americans enjoy lower-priced goods that improve living standards across income levels. The narrative that the US is being "ripped off" misses the reality of the US' economic position. Trade deficits reflect capital flows and are not scorecards. A trade deficit simply means Americans are buying more foreign goods than foreigners are buying American goods. But those dollars don't disappear – they return as investments in American companies, real estate, and government bonds. This isn't to say there aren't legitimate concerns about specific trade practices. But fixating on the deficit number alone is like judging a book by counting its pages rather than reading it. What are your thoughts? Is America's trade position misunderstood? #Economics #GlobalTrade #TradeDeficit #USEconomy #InternationalFinance

Five non obvious learnings from my decade in startup investing. Long-term success in early-stage venture capital is complex, shaped by market cycles, behavioral dynamics, and systemic inefficiencies. Here are my top 5 learnings from a decade of investing in startups. Let’s see how these age over the coming decade! 1. The Best Deals Often Look Mediocre at First Most breakout companies don’t look obvious at seed stage. The best founders are often contrarian and misunderstood. Many investors over-index on early traction, but true long-term winners usually show strong founder insight, adaptability, and a unique way of thinking—even if they lack polished decks or conventional signals of success. 2. Luck is a Skill (If You Know How to Create It) “Being lucky” in venture isn’t random - it’s an outcome of positioning, information asymmetry, and behavioral adaptability. The best investors actively manufacture luck by: - Expanding surface area (helping founders before investing, building deep networks, staying top-of-mind). - Recognizing second-order patterns (e.g., market shifts before they reflect in metrics). - Embracing serendipity (following curiosity, taking unexpected meetings). 3. Portfolio Math Lies – It’s About Anti-Portfolio Thinking Traditional portfolio theory suggests you need a few outliers to drive returns. But the key is actually avoiding the wrong misses. Many VCs focus on what they invest in, but what you don’t invest in matters just as much. - Missing a Flipkart, Swiggy, or PayTM due to pattern-matching bias is far more damaging than picking a mediocre deal. - The best investors revisit why they said ‘no’ to past unicorns and refine their filters constantly. 4. The Biggest Risk is “Too Much Conviction” The more experienced an investor becomes, the greater the risk of false confidence. Early-stage VC is probabilistic, but many long-term investors fall into the trap of overestimating their ability to predict outcomes. - Markets change. What worked in 2015 may not work in 2025. - The best investors build mechanisms for self-doubt—forcing themselves to challenge their assumptions regularly. 5. Reputation Compounds Like Capital – But in Unexpected Ways Most people assume VC reputation comes from returns or social status. In reality, the most enduring reputations come from trust, founder-first behavior, and non-obvious signals: - The way you handle bad outcomes matters more than your wins. - Long-term reputation isn’t just built with founders - it’s shaped by other investors, LPs, ex-employees, and even competitors. - The best VCs give more than they take, often in ways that don’t yield an immediate return but create long-term leverage.

China announced that its weighing a near $300B rescue package for its equity markets - which are at multi decade lows. While asset stimulus is a step in the right direction, it is not the most effective type of stimulus that Beijing could offer its battered economy. Fiscal stimulus, ideally through direct support to consumers, not only has a significantly larger multiplier effect, and therefore greater bang for its buck, but it also indirectly flows through to asset prices as a second order effect. In order for China to truly turn its economic woes around, fiscal stimulus to consumers and businesses, combined with monetary stimulus (in the form of lower interest rates) are necessary.

In today's Business Standard , Arvind Subramanian, Josh Felman, and I discuss the implications of a significant shift in Reserve Bank of India (RBI)'s exchange rate policy. Although not formally announced, the RBI has effectively pegged the rupee to the dollar since late 2022. Maintaining this peg has come at a steep cost—approximately $200 billion in forex interventions over two and a half years, including $100 billion since September through spot and forward markets. Such a strategy, however, is not without risks. Exchange rate pegs tend to erode competitiveness and bind monetary policy to defending the currency rather than addressing domestic economic priorities. These vulnerabilities leave the rupee exposed. Should markets perceive it as overvalued or anticipate a shift in monetary focus, speculative pressures could mount, forcing a disruptive adjustment. The prudent course for the RBI is to allow a gradual depreciation of the rupee, bringing it closer to equilibrium value. This would free monetary policy to focus on pressing domestic needs while safeguarding India's hard-earned reputation for prudent macroeconomic management. Link to the article: https://lnkd.in/gU-uyqzR

It’s a foregone conclusion that the Fed will keep its policy rate unchanged today - but all eyes are on the dot plot… In December, the dot plot, which charts policymakers’ rate expectations, showed a median forecast of three cuts in 2024. It’s possible this could fall to two - which might bring a negative reaction for both #equity and fixed income markets. But regardless of where the dots land, we continue to see an overall healthy outlook for the US #economy and believe the #Fed is in position to cut rates later in the year for a few key reasons – which supports our positive view on both quality bonds and quality stocks: -The Fed is likely to tolerate a couple months of disappointing inflation data as Fed officials have acknowledged the path down to its 2% target will not be a straight line. -The labor market continues to see signs of cooling – with the latest report showing a moderation in average hourly earnings and a higher unemployment rate. -Economic growth has returned to a more sustainable level with the Atlanta Fed GDP tacker coming down to around 2.1%, following the latest retail sales data.

The chart below portrays a predicament that is progressively becoming the centerpiece of the demand argument for commodities. Despite the recent upsurge in construction spending, commodity producers have evidently fallen short of matching this trend. Capital expenditure in natural resource industries has remained near historically low levels, especially when adjusted for GDP. It is important to bear in mind that changes in the supply curve of commodities typically align with the capital spending behavior of underlying producers, albeit with a significant lag effect. Essentially, it requires time for investments to translate into increased supply. The current scarcity of capex among these producers, juxtaposed with the upsurge in construction expenditure fueling material demand, ,in our analysis, portends significantly higher commodity prices to balance these markets in the face of these structural supply constraints. Significantly higher prices, in our view, will be necessary to incentivize new capex investment, and it will take many years before these new supplies come on stream in a significant enough way to alleviate pricing conditions. It has been taking a decade or more on average to bring a new discovery into production in today’s global anti-mining climate given the environmental and social licensing, government permitting, and capital-raising challenges.

As if all the trade turmoil, and now evident weakness in the bond market was not enough for stocks to contend with, our earnings model says the S&P 500 is at risk of falling short of expectations for the first time since 2020. Financials kick off this week and could be a notable weak spot, as forecasts for the next 12 months now look too bullish. Over the past year, the Bloomberg Financial Conditions Index has gone from one standard deviation easier than pre-Great Financial Crisis norms to one standard deviation tight. Even assuming the past year's run rate on personal savings and the most recent reading on the percent of banks tightening loan standards -- both have trended favorably for financials earnings -- that would imply an 11.1% drop in sector EPS. Consensus is for 5.3% growth. Bloomberg Intelligence Wendy Soong Michael Casper, CFA