Global supply chain pressures may have peaked, a recent index suggests

Global supply chain pressures may have peaked, a recent index suggests

January 6, 2021: According to a recent gauge from the New York Federal Reserve, the global supply chain pressures blamed for disrupting the flow of goods and sparking high inflation may have finally peaked.

Unveiled in a blog post-Tuesday, the Fed’s new tool shows global supply chain pressures at dizzying levels. But it suggested those problems may have peaked in what could bring a welcome reprieve for a White House tries to quell fears about inflation levels not seen since Ronald Reagan was president.

The new metric, the Global Supply Chain Pressure Index, documents disruptions to supply chains since 1997. The gauge has moved around its average.

The jump in supply-chain pressures seen in the pandemic blew away past increases in the index, including one in 2011 when a tsunami whacked Japan’s production and a flood in Thailand hamstrung the globe’s ability to produce cars and electronics, according to Fed researchers.

“The spikes in the GSCPI associated with the events mentioned above pale in comparison to what has been observed since the COVID-19 pandemic began,” the group wrote.

“The GSCPI jumped at the beginning of the pandemic period when China imposed lockdown measures,” the researchers added. “The index then fell briefly as world production started to get back online in the summer of 2020, before rising at a dramatic pace in the winter of 2020 and the subsequent recovery period.”

The model shows global supply pressures are nearly 4.5 standard deviations above normal, an extreme level not seen at any point since 1997. But relief may be on the horizon.

The index’s recent findings suggest that supply-chain disruptions, while historically high,” and might begin to moderate somewhat going forward,” wrote the New York Fed team, led by economists Gianluca Benigno and Julian di Giovanni.

The projection is welcome news to the Biden administration, which for months has scrambled to pacify public angst more than rising food and energy prices caused by supply-chain hiccups. Consumer inflation, rising 6.8% in November, erodes the purchasing power of dollars as goods from milk to cars grow expensive. November’s year-by-year inflation print was the hottest since 1982.

Democrats argue that supply-chain issues will resolve as they enact their legislative agenda and workers return to their jobs. Republicans have seen success in blaming President Joe Biden and his colleagues for rising costs.

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Global supply chain pressures may have peaked, a recent index suggests