The Federal Reserve's latest tool shows global supply chain pressures at unprecedented heights. However, it seems that those issues have settled.
The high pressures on global supply chain networks that resulted in shortage of essential goods and materials and a rise in inflation may have peaked, according to a recent index by the New York Federal Reserve.
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When China imposed a lockdown at the start of the pandemic, the Global Supply Chain Pressure Index (GSCPI) surged. As production restarted, pressures eased but rose again during the winter of 2020 as COVID-19 infections spiked.
The Federal Reserve's latest tool, which it revealed in a blog post on Tuesday, shows global supply chain pressures at unprecedented heights. However, it seems that those issues have settled.
The researchers also discovered that container shipping rates rose rapidly during the economic recovery than they did during the global financial crisis. However, the researchers added that the prices of shipping raw materials like coal and steel surged with the post-GFC recovery.
The group noted that the GSCPI surges linked with the aforementioned events pale in comparison to what has been observed since the outbreak COVID-19 pandemic.
The researchers revealed that the GSCPI rose at the start of the pandemic when China implemented lockdown measures.
The New York Fed team spearheaded by economists Gianluca Benigno and Julian di Giovanni stated that supply-chain disruptions, while historically high have peaked and may start to settle going forward.
Also read: Ensuring flow of supply chains
The prediction is positive news for the Joe Biden administration, which has been witnessing public rage over increasing food and energy costs owing to supply-chain problems for months.
Consumer inflation, which rose by 6.8 percent in November, deteriorates the purchasing power of the dollar by raising the cost of everything from essentials like milk to cars. The year-over-year inflation rate in November was the highest since 1982.
The survey, however, did not fully account for the impact of the Omicron COVID-19 variant, which could force some workers to stay at home and cease supply chain progress.
Officials at the Federal Reserve are also maintaining a close eye on supply chain disruptions as they chalk out a plan for withdrawing monetary aid furnished during the pandemic.
(Edited by : Vijay Anand)