NY Fed Says Worldwide Supply Chains Back to Normal

After years of shortages, global supply chains have returned to pre-pandemic levels.

That’s according to findings Monday (March 6) in the Federal Reserve Bank of New York’s monthly Global Supply Chain Index (GSCPI), which shows supply chain pressures dropping even as consumers brace themselves for a long period of high retail prices.

“Global supply chain pressures decreased considerably in February and are now below the historical average,” the bank said in its report.

“There were significant downward contributions by the majority of the factors, with the largest negative contribution from European Area delivery times. The GSCPI’s recent movements suggest that global supply chain conditions have returned to normal after experiencing temporary setbacks around the turn of the year.”

The index’s reading of -0.26 for February was the lowest reading since August 2019, the report shows.

The news follows reports last month that a healing supply chain had caused shipping costs to drop in some places, but not others, with an estimated 70% of goods that ship in containers on massive cargo ships under long-term contracts negotiated during the pandemic. That means retailers and manufacturers could be forced to wait before reducing prices.

“We need to be cautious about the drop in spot prices for containerized freight,” Jason Miller, an associate professor of supply chain management at Michigan State University, said in an interview with Bloomberg News. “Most freight moves under contract prices that are still well above pre-COVID levels.”

The Bloomberg report argued that this “stickiness” could show why inflation has persisted in the U.S. and Europe. There’s also the fact that it’s unclear how long inflationary trends will take to make it through supply chains, as companies aren’t willing to change prices too often.

Meanwhile, recent research by PYMNTS shows that news of easing inflation has done little to make consumers feel positive about the economy.

Against this backdrop, deal chasing has become the norm for U.S. consumers, with almost half of them shifting to merchants with larger discounts and offers over the past year. And nearly half of grocery and retail shoppers surveyed by PYMNTS would leave their favorite brand for a less expensive competitor.

These deal chasers are also the most pessimistic about stabilizing inflation, and the consumers who have lost the most purchasing power, according to “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers.”

More than half of deal chasers said that their wages have stayed the same or fallen in the last 12 months. While deal chasers and persuadable consumers have seen inflation have a similar impact on their purchasing power, deal chasers are much less optimistic about inflation’s duration, saying they expect it to last until almost the end of next year.