Supply chain pressures eased last month, the Federal Reserve Bank of New York said Friday, but it’s possible the benign reading is just the calm before some turbulence arrives.
The bank’s Global Supply Chain Pressure Index rose to -0.15 in December from an upwardly revised 0.13 in November.
December’s negative reading indicates lower than normal supply chain pressures, suggesting a reduced contribution to inflationary pressures. The bank provided no comment on the causes of the latest changes in the index, which returned to negative territory where, with the exception of November’s positive reading, it has remained since February 2023.
Supply chain pressures have figured prominently in the debate over the drivers of inflation for some time. Disruptions in the movement of goods were a key factor in the inflationary surge that followed the outbreak of the coronavirus pandemic. Supply chain pressures peaked in December 2021, when the New York Fed index settled at a record high of 4.33, and have declined fairly steadily since then, causing also made it possible to monitor the decline in inflationary pressures.
Easing price pressures also allowed the Fed to almost certainly end the process of raising its short-term rate target, with policymakers now considering rate cuts later this year.
But Fed officials are also aware that the supporting role that supply chains played in improving inflation numbers may be over.
Minutes from the Fed’s December rate-setting meeting, released Wednesday, said “several participants believed the healing of supply chains and labor supply was largely complete and that, therefore, continued progress in reducing inflation may have to come primarily from a further slowdown in demand for products and labor, with restrictive monetary policy continuing to play a central role.”
Fed officials also cited supply chain issues as a potential upside risk going forward, signaling “a potential rebound in commodity prices following the period of supply chain improvement.” supply”.
This risk could also increase due to challenges to shipping in Middle Eastern waters, where attacks on commercial vessels have disrupted traffic and risk shifting maritime traffic to longer and more expensive routes. . Shipping giant Maersk said Friday it was rerouting all its ships that need to pass through the Red Sea and around the Horn of Africa, for example.
In a conference call with reporters Friday, Jared Bernstein, chairman of the White House Council of Economic Advisers, said: “We will remain in contact with our partners to determine the impact on prices and on the supply chain. ‘supply’, while adding that the unrest has so far had a ‘limited impact’ on energy prices.
Beyond geopolitical factors, other supply chain forces may be at play.
“After falling sharply last year, indicators of supply chain pressure have reversed in recent months, with air and ocean freight costs rising noticeably,” wrote Bruce Kasman and Nora Szentivanyi, economists at JP Morgan, in a note published Thursday. “Alongside this development, the disinflationary impulse resulting from the contraction in manufacturing over the year as a whole appears to be easing, with global manufacturing production returning to growth during the second half of the year. last.
2024-01-05 17:57:09
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