Jan 12, 2022 - Economy & Business

A supply chain inflection point (maybe)

Recreated from the New York Fed; Chart: Axios Visuals
Recreated from the New York Fed; Chart: Axios Visuals

Signs of supply chain bottlenecks easing are there … if you look closely.

Why it matters: Consumer price growth — which is at a 40-year high — may start to slow if these trends continue.

Driving the news: Researchers at the New York Fed created the Global Supply Chain Pressure Index as a new way to measure the total level of strain on producers and shippers.

  • They found a slight pullback in overall pressure on the system toward the end of last year.
  • One example: Growth in container shipping rates has cooled, judging from the Baltic Dry Index and Harpex Index.

Meanwhile: New data shows that raw materials prices grew at a significantly slower rate in December, according to the Institute for Supply Management Manufacturing survey.

  • And within the services sector, order backlog growth slowed from its record high in November, based on the Services survey published last week.
  • "The survey data suggest that supply pressures are easing,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note.

What to watch: The Omicron effect, not quite captured in the December surveys.

  • While the spread of the latest variant may temper demand for services as soft lockdowns take place, the rise in cases could still ultimately continue to stymie supply chains as workers fall sick or lose their jobs, Shepherdson wrote.

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