Some Signs Indicate Supply Chain Easing

Though supply chain snags continue, some indicators point to possible improvements in the global transport of goods.

The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index (GSCPI), a combination of transportation cost data and manufacturing indicators used to assess supply chain status, fell between April and June. Though the rate remains at “historically high levels,” according to the bank, the decline over three consecutive months is a positive trend.

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The June decline was attributed mainly to a large decrease in shipping times from China, the New York Fed reported. The country has been able to manage more shipments despite its rigorous COVID-19 restrictions.

Also, container costs have fallen. A 40-foot shipping container cost $11,000 in September 2021, $9,300 in early 2022, and $6,400 as of the end of July, according to the freight platform Freightos.

The Morgan Stanley Business Conditions Index for July also showed a promising trajectory, with the number of analysts’ citing an improvement in conditions rising from 17% to 54% of surveyed respondents. None reported a worsening of conditions.

Factors that could impede a complete return to pre-pandemic conditions include the BA.5 Omicron subvariant, which could create labor shortages at ports, Konstantin Krebs told CNN. Krebs is Managing Partner at Capstan Capital, an investment banking firm that works with container shipping executives.

Also, rail disruptions at U.S. ports have the capacity to impede shipping. In late July, President Biden took action to ward off a strike by 115,000 rail workers.

"These disputes threaten substantially to interrupt interstate commerce to a degree that would deprive a section of the country of essential transportation service," said Biden in his order.

Any supply chain rebound will impact inflation, which has been caused in part by limited access to goods.