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Global supply-chain disruptions are beginning to unwind as shipping rates decline, the time taken to deliver goods falls quickly, port congestion eases and the backlog of orders is cleared, raising the prospect of lower core goods (excluding energy) inflation ahead, Fitch Ratings said in a note on Friday.
The cost of shipping freight has declined by as much as 70% on some routes since September 2021 while transporting cargo now takes around 90 days instead of 122 days in April 2022; congestion at US ports has dropped significantly, falling by close to 80% since last November; the latest manufacturing PMI index also showed that order backlogs are being cleared more quickly and supplier delivery times are falling fast, according to the report.
A slowdown in consumer demand for durables is helping to ease supply-chain bottlenecks as households’ purchasing power is dented by increases in interest rates and higher inflation, it said.
There are also signs of semiconductor shortages starting to ease as the time taken to deliver them appears to have peaked. Korean inventories of semiconductors rose at the fastest rate since 2016 while growth in shipments has fallen rapidly.
However, risks to the supply chain remain given China’s zero Covid-19 policy, which could result in renewed disruptions to China’s export ability while gas rationing in Europe may affect industrial supply chains, it noted.