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Economy in Brief

Conflicting Supply Side Messages and Ukraine
by Andrew Cates  February 23, 2022

Figure 1: Flash PMI surveys suggest global supply side congestion may be easing

The growing risk of a protracted conflict in Ukraine has added another layer of uncertainty to the global economic outlook. It is too soon to establish what the broader impact from this conflict might be but it could potentially undermine business and consumer confidence in Europe, further choke supply chain channels and further lift headline inflation rates from already high levels.

On supply chain issues the messaging from incoming data had been more encouraging of late. This week's flash Purchasing Managers' Surveys, for example, revealed a broadly-based improvement in suppliers' delivery times in January in several major economies. This extended a global trend toward improvement that began last October, as evidenced in the figure above, and likely rooted in a healing global COVID picture. .

Higher frequency indicators, however, suggest we should reserve judgement on this for a little while longer. The Baltic Dry Index, for example, an indicator of shipping costs, has climbed in recent days (see figure below), echoing a trend toward higher oil prices. Those trends suggest that supply side congestion could be building again, at least in some sectors.

It's too soon to write off a likely COVID-related improvement in supply chain channels in the period ahead but at the very least these data will bear watching closely in the coming weeks.

Figure 2: The Baltic Dry Index has climbed in recent days

Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.

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