The supply chain nightmare is jacking up prices for consumers and slowing the global economic recovery. Unfortunately, Moody’s Analytics warns supply chain disruptions “will get worse before they get better.”
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Moody’s wrote in a Monday report.
Indeed, the IMF downgraded its 2021 US growth forecast on Tuesday by one percentage point, the most for any G7 economy. The IMF cited supply chain disruptions and weakening consumption — which itself has been partially driven by supply chain bottlenecks such as a lack of new cars amid the computer chip shortage.
“Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise and GDP growth worldwide will not be as robust as a result,” Moody’s wrote in the report.
Moody’s said the “weakest link” may be the shortage of truck drivers — an issue that has contributed to congestion at ports and caused gas stations in the United Kingdom to run dry. Unfortunately, Moody’s warned there are “dark clouds ahead” because several factors make overcoming the supply constraints particularly challenging.
First, the firm pointed to differences in how countries are fighting Covid, with China aiming for zero cases while the United States is “more willing to live with Covid-19 as an endemic disease.”
“This presents a serious challenge to harmonizing the rules and regulations by which transport workers move in and out of ports and hubs around the world,” the analysts wrote.
Secondly, Moody’s cited the lack of a “concerted global effort to ensure the smooth operation” of the worldwide logistics and transportation network.
Others are much more optimistic on the supply chain outlook.
JPMorgan Chase CEO Jamie Dimon said Monday that these supply chain hiccups will fade quickly.
“This will not be an issue next year at all,” Dimon said during a conference held by the Institute of International Finance, CNBC reported. “This is the worst part of it. I think great market systems will adjust for it like companies have.”