In 2021, many believed that surging consumer prices were due to the supply chain crisis. The government and investors all started to focus on what was going on with the global ports. They revealed widespread bottlenecks which is why the Federal Reserve Bank of New York created the Global Supply Chain Pressure Index (GSCPI). It was theorized that if the pressure on the supply chain was eased then inflation would also grind to a halt.
The GSCPI started to track inflation trends in 2021 and they saw that it fell sharply in 2022 with the pressure going down to 66% from the peak. This accounted for 4.31 standard deviations which, in December, were above average and which then went to a 1.47 standard deviation in August above average.
Despite the statistics, the U.S. inflammation measure which occurs very much has been the opposite with continued increases.
The data has left many wondering why if the supply chain is improving has inflation not been effectively reined in.
In 2021, most were concerned with import delays which increased the costs of goods and also caused freight costs to skyrocket. Now, most executives say there is too much inventory in warehouses. Many are even starting to discontinue goods in an effort to clear up warehouse space.
If the supply chain drove inflation why is inflation still high?
Theories abound, but many see the supply chain as a red herring. Others state that supply chain pressures have eased substantially but they still remain above the levels found pre-Covid. Basically, most agree that the supply chain crunch is still a reality, and that inflation is going to continue into the foreseeable future.
- GSCPI is down from its peak but still remains six times higher than from 2017 to 2019.
- Flexport’s OTI has doubled.
- Drewry World Container Index sits at three times higher than in 2019.
- FreightWaves SONAR Container Atlas Ocean TEU index is 35% higher for US-bound cargo compared to 2019.
As of the last of September, there are 109 container vessels waiting outside U.S. ports which are lower than the high of150 but still way above the pre-covid numbers.
At this point, things have improved with supply chains but not dramatically enough to curb inflation.
For more updates about the supply chain, we encourage you to contact Sobel Network Shipping Co. Inc.
