In July, the New York Fed said in its latest Global Supply Stress Index report that global supply chain stress had fallen to the lowest level since January 2021 in July, the third straight time , as port congestion and other obstacles eased. month decline.
It’s an encouraging sign that Fed policymakers hope supply chain issues will ease to help curb inflation, which is at a 40-year high.
The New York Fed’s Global Supply Chain Stress Index combines shipping costs, lead times, backlogs and other statistics into a single measure.
Although the index is now down more than 50% from its all-time high in December, it is still well above pre-coronavirus levels. That matches the findings of a survey released earlier this week by the Institute for Supply Management. A measure of the speed of deliveries from U.S. suppliers is also improving, the survey showed.
Globally, a supplier delivery time index compiled by S&P Global and JPMorgan Chase & Co. shows a marked reduction in delivery delays this year. The index rose to its highest level since November 2020 in July, with higher readings indicating better deliveries.
Supply chain issues have emerged as a key issue for the global economy’s recovery from the pandemic, as well as for the Federal Reserve and other major central banks to curb inflation. Supply chains were hit again earlier this year as Covid-19 lockdowns in Asia and the Russian-Ukrainian conflict extended delivery times.
Morgan Stanley Asia analysts compiled an index that tracks China’s supply chain stress, based on the New York Fed index. The index had fallen for the second straight month through June, reaffirming their view that the non-commodity producer price index (PPI) has retreated from its highs.
Morgan Stanley said in a report:
“The downward trend is expected to continue, easing import prices in the rest of the world, especially in the United States.”
The U.S. Federal Reserve and other major central banks have already started raising interest rates at a faster pace to curb demand for goods and services, while hoping to better balance the economy by unblocking supply chains.