Supply Chain Snags Seem to Be Resolving, Setting Stage for Lower Prices

In October 2021, it took 110 days for an item to make its way from Asia to the U.S. In the week ending July 10, it took 95. Fifteen days is like an eternity in the world of the supply chain.

According to the logistics company Flexport, whose Ocean Timeliness Indicator tracked the recent progress, shaving off the 15 days could mean a lot for U.S. customers, particularly those used to two-day shipping.

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Also, the Baltic Dry Index, which gauges how much it costs to ship bulk commodities, is falling. The index represents a composite of costs that now are near levels seen in April 2021.

And, the New York Federal Reserve predicted in January that the crisis “might start to moderate somewhat going forward,” which could be what the data is pointing to now, seven months later.

If the indicators prove correct, consumers will see prices drop, as supply chain snags have been a major cause of recent inflation. Target, Walmart, Kohls, and Dick’s Sporting Goods have excess inventory; some merchandise has been marked down (Target has begun reducing prices for quick sale), and some overstock has gone to bargain stores.

People were eager to shop after vaccinations were available, but shipping issues kept shelves empty, driving up prices.

On the flipside, Morgan Stanley has warned that the stabilization of supply chains could be bad news for corporate profits, as companies will no longer be able to charge as much for goods. However, this decline in the price of goods may be just what it takes to finally bring down inflation.