CORONAVIRUS COVID-19 PANDEMICGENERAL PROPERTY

Global supply chain disruptions should ease

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THE global supply chain has struggles to keep up with the rapid pace of demand, but experts believe the disruption should mostly ease by H2 2022.

An Oxford Economics survey of economies accounting for 90% of world GDP, found all respondents see supply chain issues impacting growth.

Assessing the severity of these problems on a global scale is a difficult task given the multitude of factors affecting different industries and economies but Oxford Economics said supply chain problems has affected every economy surveyed, including a few that are severely affected, representing 10% of global GDP.

These findings reinforce the Global Risk Survey released this month where businesses said supply chain disruptions pose a more significant threat to the economic recovery than the ongoing global pandemic.

But there are positive signs.

Economist Tim Hunter said impacts peaking this quarter chimes with tentative signs in hard data of disruption now easing.

“We surveyed our country experts on the problems facing 45 of the economies they cover, representing 90% of world output. Our results found that almost all see disruption having already peaked or about to peak this quarter, their view tallying with tentative signs in some industries of problems now easing. But we remain cautious,” he added.

Hunter said global shipping rates have also declined on the month in early November, and global indices of inventories show that, while they remain below historical norms, stocks are being rebuilt in many industries.

“Our expectation of supply chain problems peaking globally this quarter corresponds with tentative signs of easing in data, with the HARPEX global shipping rates index declining on the month in early November, and our own calculations showing global inventories improving relative to demand in most sectors in the data available to August,”

Hunt said nearly all of country experts expect disruption to ease by H2 2022 as businesses rebuild inventories, temporary supply setbacks from lockdowns dissipate, and demand continues to rotate away from goods as economies continue to reopen.

“But further supply-chain disruption remains a key downside risk to our baseline, with our economists citing materials shortages as the greatest single source of risk and labour shortages mostly being cited as being mixed with other issues. The risk to supply from further lockdowns remains but has faded as “zero covid” attitudes have weakened, being previously espoused across much of APAC (with China remaining a notable holdout).

“Nonetheless, even with their overall negative demand impact, lockdowns would still see spending rotate back towards goods, further disrupting supply chains. As well as being a key threat to our baseline, risks to supply chains are also at the fore of businesses’ concerns; the October edition of our Global Risk Survey found that businesses had become more pessimistic on economic prospects over the past month, with persistent supply-chain disruption seen as the greatest short-term risk to the global economy.

“We expect steady relief from disruption over 2022, but risks cannot be discounted.”

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