New Studies Find Unprecedented Impact from Supply-Chain Turmoil

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Regional Fed banks’ assessments mark new efforts by economic policymakers to measure disruptions driven by the pandemic and shipping strains

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Prices of goods transported by sea from China to the US West Coast rose more than 72 percent from early-pandemic lows of more than 50% in the third quarter of 2021 to container shipping rates, a long-term trend for researchers. Regional Fed Bank wrote in the report released this week.

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This is compared with a 41 percentage-point swing in the aftermath of the recession triggered by the 2007–2008 financial crisis, when shipping prices jumped more than 14% from a longer-term trend in 2010, according to the report, which found imports. Used to use data from the Commerce Department’s Bureau of Economic Analysis and an index of freight rates from a shipping service provider.

A St. Louis Fed analysis said supply and demand forces have driven more than half of the rate hikes since mid-2020, a period that has seen a surge in shipping demand as retailers try to restore inventory. for those who were eliminated during the pandemic. The report attributed the disruption to the remaining shipping operations which have been affected by issues such as port congestion.

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“In the Great Recession, somehow prices didn’t react that much,” said St. Louis Fed Bank economist Fernando Leibovici, who co-authored the report with research associate Jason Dunn. During the pandemic, he said, “there is certainly a role being played by supply factors.”

The report is one of the latest in a series of efforts by economic policymakers to assess the impact of supply-chain strains after nearly two years of unrest during the pandemic, as costs of goods and raw materials range from availability to transportation costs. has issues. affected the global economy.

A global supply chain pressure index pulling together a number of measures to provide a more comprehensive summary of potential disruptions affecting global supply chains, Federal Reserve Bank of New York economists wrote on the bank’s Liberty Street Economics blog this week. have developed. ,

Their measurements, using data going back to 1997, showed supply-chain pressures swinging outside longer-term trend lines dramatically during the pandemic and reaching a new high in October 2021. A slip from that high next month “seems” that global supply chain pressures, while still at historically highs, have peaked and may begin to rise somewhat further,” New York Fed economists wrote.

Various measures from the shipping sector show that sea prices have reached record highs in the past year. The global price of shipping a 40-foot container rose to more than $11,000 in September from about $1,400 at the start of the pandemic, according to an index by shipping technology firm Freightos.

Louis Fed research shows that “we are firmly in uncharted territory in terms of how far we’ve moved,” said Chris Rogers, chief supply-chain economist at freight forwarder Flexport Inc.

He said the major driver of rising rates is strong consumer demand for goods which is swallowing up the transport network. “If it was just a port closure here or there, or some lack of trucking here or there, you wouldn’t have really seen anything close to the challenges or rates increases,” said Mr. Rogers.

Write Lydia O’Neal at [email protected]

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