The global supply chain crisis that led to historic levels of inflation unseen in decades may have reached a tipping point and may soon be over, according to a new barometer used by the US Federal Reserve to monitor supply chain pressures.
The Fed tool demonstrated that while supply chain pressures are still at dangerous level, the gridlock may have peaked, CNBC reported.
The new barometer, called the Global Supply Chain Pressure Index (GSCPI), analyzes supply chain disruptions beginning with 1997.
The current pandemic supply chain crisis is far more severe than other increases in the metric, even spikes seen in 2011 in the aftermath of the tsunami in Japan that severely curtailed production and a flood in Thailand that hampered worldwide production of cars and electronics.
“The spikes in the GSCPI associated with the aforementioned events pale in comparison to what has been observed since the COVID-19 pandemic began,” said analysts with the New York Fed in a statement.
They added: “The GSCPI jumps at the beginning of the pandemic period, when China imposed lockdown measures. The index then fell briefly as world production started to get back online around the summer of 2020, before rising at a dramatic pace during the winter of 2020 (with COVID resurgent) and the subsequent recovery period.”
The barometer showed that supply chain pressures are at a level not seen since 1997. However, the team’s findings point to the possibility that pressures “have peaked and might start to moderate somewhat going forward.”
Democrats have been arguing for months that the supply chain crisis will resolve itself as they pass their legislative agenda. Republicans have been blaming the Biden administration for soaring consumer costs and an inability to articulate a clear plan to tame rising prices.