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June 4, 2023

Global Supply Pressure eased in February as Shipping Cost Declined: New York Federal Reserve

By Shivani

According to the new data released by New York Federal Reserve (NY Fed) on Thursday, the pressure on the global supply chain eased in February as backlogs and delivery time improved in several key markets and a measure of ocean shipping cost declined.

The New York Fed’s supply chain pressure index, which was first published in January to assess the impact of the coronavirus pandemic on global production problems and prices, is still at an all-time high.

However, after reaching a high of 4.5 in December, it has dropped in consecutive months to 3.3 in February, with 0 representing the index’s long-term average. The index combines data from the United States, the eurozone, the United Kingdom, Japan, China, Taiwan, and South Korea on shipping costs, delay times, and order backlogs.

According to NY Fed analysts, the improvement was widespread across regions and categories. If this trend continues, it could represent a watershed moment in the Federal Reserve’s and other central banks’ efforts to control inflation.

Policymakers have blamed global supply chain issues for much of the recent price increase. If these issues improve over time, inflation may fall with less effort on the part of central banks to address the problem by squeezing demand through higher interest rates.

Improvements in outbound shipments from Asia, as well as delivery times in South Korea and the United Kingdom, contributed significantly to the index’s decline, while some components in the United States, such as other backlogs, deteriorated slightly.

Nonetheless, the overall index for the United States falls to 2.63 from a high of 2.99 in January.

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