Global supply chain pressures are easing, but new hurdles await

Although easing restrictions in China have helped to reduce global supply chain pressures, we expect rising costs and weakening demand to weigh on global supply chains for the second half of this year and into 2023.

What you will learn:

• The global container freight index has followed a downward trend in recent months, likely underpinned by dampening world goods demand. A continued demand slowdown, driven by a combination of high inflation and interest rate hikes, could lead to a negative bullwhip effect along supply chains, as retailers potentially begin overreacting to reductions in demand.
• Moreover, while some measures of producer price inflation are showing signs of peaking, the complete shutdown of gas supplies from Russia to Europe means price risks for energy-intensive producers, in particular, will be skewed to the upside. Although increasing gas storage across European countries may provide temporary relief, with wholesale gas and electricity prices set to remain higher for longer, we expect European firms to cut back on production and even face some closures.
• As a new set of supply chain challenges emerge, it is worth noting that existing input and labour supply shortages have yet to fully dissipate.