Omicron Slows Improvement of Supply-Chain Crunch

The recent surge of the omicron Covid variant throughout the world is slowing the improvement in the global supply chain.  As a result, shortages of goods that peaked last summer are only slowly improving, keeping prices elevated.  Also, labor markets continue to struggle due to a scarcity of workers.

This week, a UBS report shows that container availability is still low and shipping costs are still high. The report showed a quarter of the bottleneck pressure has been reduced versus the first three quarters of 2021 and is down -37% from a peak in October.  Another positive is that air cargo rates have leveled off, and spending on goods is shifting to services.

According to Ocean Timeliness Indicator data, cargo transit times remain near record highs.  Cargo on eastbound traffic from Asia takes an average of 112 days, almost matching the record of 113 days reported three weeks earlier.  Cargo moving westbound from Asia took 110 days to get to its destination, just below the record 111 days reported in mid-January.

 

The supply-chain turmoil continues to affect the global economy.  Cisco Systems (CSCO), the world’s biggest maker of computer networking equipment, said Wednesday that it still can’t get enough components to meet strong growth in orders.  Also, European car sales in January declined for a seventh month as an ongoing semiconductor shortage held back production.

Labor and component shortages, transport delays, and pandemic lockdowns have plagued the global economy since the Covid crisis erupted in 2020.  While some of the turmoil is starting to clear as the wave of Covid infections ebbs and many countries ease restrictions, new mutations akin to omicron risk further disruptions to the global supply chain.