16 October - 22 October

As Supply Chain Data Eases, There’s Some Hope For US Inflation Relief

Spotlight on the impact of supply chain data easing out, returning to 2020 levels, shining a ray of hope on the inflation in the US.

Highlights on concerns that the US defense sector might struggle to keep up with demand for American-made weapons, the cost of candy increasing 13.1% this year, and more.

Trending discussion on how Halloween candy may be really expensive this year as prices increase.

Your Weekly Spotlight

In 2020-21, as the pandemic truly hit the world, supply chain disruptions became the norm. Most ports have had to deal with port congestion and a lack of warehousing space, leading to delays in transporting freight across railways and roadways. This resulted in a scarcity of various essential goods and inflationary pressures across the US. But finally, there seems to be some light at the end of the tunnel. Oxford Economics, a research firm, said that its proprietary tracker showed that supply chain strains eased in September after increasing slightly in August.  

The New York Fed also reported an easing of supply chain pressures earlier this month. As of September, the bank’s Global Supply Chain Pressure Index had eased for five straight months, leading the bank to note that the index’s year-to-date movements suggest that global supply chain pressures are beginning to fall back in line with historical levels. 

For perspective, The New York Fed supply chain pressure index was last at essentially “normal” levels in January 2020 before the pandemic hit, and surged to a reading of 4.3 in December 2021, before starting a retreat that left the index at 1.05 as of last month.

In fact, Oxford Economics noted in its report that price pressures recorded a third straight monthly decline as transportation pressures finally eased and warehousing capacity availability improved. The report also noted that while employment is on the rise, the global labor markets show signs of stress.

Key Takeaway

Supply-related issues have been a major problem for the economy and for monetary policymakers for some time now. Supply disruptions tied to the pandemic have now been joined by disruptions related to Russia’s war on Ukraine.

Supply chain pressures have been a key driver of the surge in prices that has pushed US inflation to 40-year highs. The Federal Reserve has responded to the surge in inflation with an aggressive campaign of interest rate hikes that are almost certain to run into next year. While the US Federal Reserve can’t control supply, it can hike interest rates and thus influence demand. Supply chain disruptions easing may give some relief from inflation, but it may still take a while to truly help.

Highlights

 
 
 
 

Trending

Various products like baby formula, butter, and beer have been in scarcity as supply chain disruptions play out. Whether it’s the lack of key raw materials or ingredients that go into manufacturing these items or rail and road delays and port congestion, the supply of various essential items has been drastically affected, leading to shortages. Now, this shortage may spill over to Halloween candy. Giving out Halloween treats this year may be really expensive.

The cost of candy and chewing gum jumped 13.1% in September from last year, the most ever, according to the latest US inflation data. The culprit is expensive sugar. US refined sugar prices have soared this year after drought hurt beet-sugar crops in northern states. Chocolate has also been hit by inflation in recent months, partly because of higher costs for chocolate makers. Supply chain chaos caused by the pandemic and then the war in Ukraine have been spilling over into cocoa markets.

Not just candy and chocolate, prices across commodities are at an all-time high. US consumer prices rose by more than forecast to a 40-year high in September. The core consumer price index, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982. Thanks to the pandemic and the Russia-Ukraine war, supply chain disruptions have become mainstream. 

Amidst these woes, consumers also have to deal with inflationary pressure, as everything becomes more expensive. While supply chain woes finally seem to be easing according to various reports, the increase in prices of various goods may be here to stay.

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