Global Supply Chain Pressure Index: May 2022 Update

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Supply chain disruptions continue to be a major challenge as the global economy recovers from the COVID-19 pandemic. In addition, recent geopolitical and pandemic-related developments (particularly in China) could put new pressures on global supply chains. In a January article, we first introduced the Global Supply Chain Pressure Index (GSCPI), a parsimonious global metric designed to capture supply chain disruptions using a range of indicators. We revised our index in March and are now launching the GSCPI as a standalone product, with new readings to be released each month. In this article, we review the GSCPI readings through April 2022 and briefly discuss the drivers of the index’s recent moves.

More stress on supply chains

The table below provides an update from the GSCPI through April; readers can find a link to the updated dataset on our new product page. Between December 2021 and March 2022, the index recorded an easing of pressures on the global supply chain, although they remained at historically very high levels. However, the April 2022 reading suggests worsening conditions as new tensions emerge in global supply chains.

April data points to worsening supply chain pressures

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Stock Exchange; IHS Markit; Supply Management Institute; Haver Analytics; Bloomberg LP; authors’ calculations.

Note: The index is scaled by its standard deviation.

Methodology

Before analyzing this recent upsurge in supply chain pressures, we remind readers that the GSCPI is based on two sets of data. Global shipping costs are measured using shipping cost data, for which we use data from the Baltic Drought Index (BDI) and the Harpex Indexas well as BLS air freight cost indices for cargo flights between Asia, Europe and the United States. We also use supply chain related components from Purchasing Managers Index (PMI) surveys— “delivery times”, “backlogs” and “purchased inventory” – for manufacturing companies in seven interconnected economies: China, the Eurozone, Japan, South Korea, Taiwan, the United Kingdom and the United States. United. Before combining these data within the GSCPI using principal component analysis, we remove demand effects from the underlying series by projecting the components of the supply chain PMI onto the “new orders” components of the corresponding PMI surveys and, in the same vein, projecting global transport costs measure the “new orders” and “purchased inputs” components weighted by GDP in the seven PMI surveys.

Sources of pressure

So what are the drivers of recent GSCPI movements? The graphs below illustrate how each of the underlying variables has contributed to the overall change in the IPSC over the past two months. Each column represents the contribution, in standard deviations, of each component of our index to the overall variation of the index during a given period. In the first chart, we look at February-March 2022. We note that the decrease in supply chain pressures over this period has been widespread across the various components, indicating a welcome reduction in supply chain disruptions. global supply. Most series in our dataset declined over this period; the UK backlog component deteriorated and the US purchased inventory component increased slightly.

Widespread improvements seen across all components as of March 2022

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Stock Exchange; IHS Markit; Supply Management Institute; Haver Analytics; Bloomberg LP; authors’ calculations.

In the chart below, we focus on the contributions of the underlying components of the GSCPI from March to April 2022.

Global supply chain pressures escalate in April 2022

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Stock Exchange; IHS Markit; Supply Management Institute; Haver Analytics; Bloomberg LP; authors’ calculations.

As the chart shows, the heightened pressures on the global supply chain in April were mainly due to the Chinese component of “delivery delays”, the increase in air freight costs from the United States to the United States. Asia, and the euro zone “delivery times” component, the other components having eased during the month. These developments could be associated with the strict COVID-19 containment measures adopted in China, as well as the consequences of the Ukraine-Russia conflict for supply chains in Europe.

Finally, as we noted in our previous post and discussed on our product sheet, recent GSCPI readings are subject to review. The table below compares the current version of the GSCPI with the three previous versions, showing that revisions can have an impact up to one year back. The chart indicates that, based on the current GSCPI vintage, the easing of global supply chain pressures through April has occurred at a slightly faster pace than previous GSCPI estimates suggested.

Revised and completed data may alter previous supply chain pressure readings

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Stock Exchange; IHS Markit; Supply Management Institute; Haver Analytics; Bloomberg LP; authors’ calculations.

Note: The index is scaled by its standard deviation.

conclusion

In this article, we provide an update of the GSCPI through April 2022. This estimate suggests that the moderation we have seen in recent months has been partially reversed, as containment measures in China and geopolitical developments put pressure additional on delivery times and transport costs. in China and the euro area. Future reading will be particularly interesting as we assess the potential of these developments to further increase pressures on the global supply chain.

Chart data

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Gianluca Benigno is responsible for international studies in the research and statistics group of the Federal Reserve Bank of New York.

Julian de Giovanni is responsible for climate risk studies within the Bank’s Research and Statistics Group.

Jan JJ Groen is an Economic Research Advisor in the Bank’s Research and Statistics Group.

Adam Noble is a Senior Research Analyst in the Bank’s Research and Statistics Group.

How to cite this article:
Gianluca Benigno, Julian Di Giovanni, Jan Groen and Adam Noble, “Global Supply Chain Pressure Index: May 2022 Update”, Federal Reserve Bank of New York Economy of Liberty StreetMay 18, 2022, https://libertystreeteconomics.newyorkfed.org/2022/05/global-supply-chain-pressure-index-may-2022-update/.


Warning
The opinions expressed in this article are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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