Conflicting Supply Side Messages and Ukraine
by:Andrew Cates
|in:Viewpoints
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.
Andrew Cates
AuthorMore in Author Profile »Andy Cates joined Haver Analytics as a Senior Economist in 2020. Andy has more than 25 years of experience forecasting the global economic outlook and in assessing the implications for policy settings and financial markets. He has held various senior positions in London in a number of Investment Banks including as Head of Developed Markets Economics at Nomura and as Chief Eurozone Economist at RBS. These followed a spell of 21 years as Senior International Economist at UBS, 5 of which were spent in Singapore. Prior to his time in financial services Andy was a UK economist at HM Treasury in London holding positions in the domestic forecasting and macroeconomic modelling units. He has a BA in Economics from the University of York and an MSc in Economics and Econometrics from the University of Southampton.