Aug 24, 2021 - Economy & Business

Supplier delivery times hit record slowness

Data: IHS Markit; Chart: Axios Visuals
Data: IHS Markit; Chart: Axios Visuals

It’s taking longer for businesses to get stuff delivered from their suppliers.

Why it matters: On one hand, supply chain delays are known to fan inflation as sellers can get buyers to pay higher prices for a smaller number of goods. On the other hand, these delays also reflect that the demand for goods remains robust, which is a bullish sign for the economy.

Driving the news: Average supplier delivery times have lengthened to record levels, according to an IHS Markit PMI report released Monday. This data goes back to 2007.

  • This report also showed that U.S. manufacturing growth slowed to a four-month low, and services growth decelerated to an eight-month low.

What they’re saying: "This reflects surging demand for parts at a time when supply is being constrained as the Delta variant disrupts production in many countries, notably in Asia, and shipping remains fraught with logistical issues stemming from the pandemic," Chris Williamson, IHS Markit chief business economist, tells Axios.

The big picture: In addition to long delivery times, the report showed that new orders were outpacing manufacturing output at a pace not seen before the pandemic, "which is, of course, a recipe for higher prices," Williamson adds.

  • "Not surprisingly, therefore, prices charged by U.S. producers rose at a new record high rate in August, and look set to rise further given that material and labor shortages show no signs of moderating.”

The bottom line: Supply chain issues are persisting as new COVID outbreaks are disrupting manufacturing around the world.

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