Global supply stress worsened in April, New York Fed index shows
By Howard Schneider
WASHINGTON (Reuters) – Stress on global supply chains worsened in April as China’s coronavirus lockdown measures and war in Ukraine lengthened delivery times and air freight costs between US and Asia rose, the New York Federal Reserve reported in its latest update. to a global index of supply problems.
The rise in the index has partially reversed the easing of supply problems seen over the previous four months and, if it continues, potentially means more persistent inflation even as central banks struggle to control rising prices. .
“This estimate suggests that the moderation we have seen in recent months has partially reversed, as lockdown measures in China and geopolitical developments put additional pressure on delivery times and transport costs in China and around the world. eurozone,” a New York Fed team said. Economists wrote about the April release of the regional bank’s Global Supply Chain Strain Index.
The index integrates data on shipping costs, delivery times, backlogs and other statistics into a single measure against historical standards. It rose sharply in February 2020 as the coronavirus spread and governments imposed restrictions to contain it, and has remained high ever since.
The index was first released in January and will now be released monthly in a bid to track what has become a key issue in the global recovery from the pandemic, and the efforts of the Fed and other major central banks. to curb inflation.
The US central bank and some other institutions are already raising interest rates or planning to do so in an effort to dampen consumer and business demand for goods and services.
But they also hope that supply chains will rebound, and that the pace of rate hikes and the ultimate level of rates – and the amount of global demand and growth that needs to be curtailed – will depend in part on how quickly with which this will happen.
This has brought into focus whether China’s strict COVID policies will be eased, and if so, how quickly the country’s production of manufactured goods and industrial goods can recover.
(Reporting by Howard Schneider; Editing by Paul Simao)