New studies reveal unprecedented impact of supply chain disruption


According to a report by the Federal Reserve Bank of St. Louis, international shipping costs have fluctuated much more sharply during the pandemic and amid recent supply chain disruptions than following the financial crisis there over ten years ago.

The St. Louis Fed’s analysis seeks to measure the impact of the turbulence of the past two years on an increasingly critical part of the global economy.

Prices for sea freight from China to the US west coast hovered more than 72 percentage points, from a low at the start of the pandemic to a high in the third quarter of 2021 of more than 50 % above the long-term trend in container shipping rates, according to researchers from the Fed’s regional bank wrote in the report released this week.

This compares to a change of 41 percentage points in the aftermath of the recession triggered by the financial crisis of 2007-2008, when shipping prices peaked in 2010 at just over 14% above the downward trend. long term, according to the report, which used import data from the Department of Commerce’s Bureau of Economic Analysis and a freight rate index from a shipping service provider.

The St. Louis Fed’s analysis said that the forces of supply and demand have driven just over half of the rate hike since mid-2020, a period that has seen demand. shipping increase as retailers rushed to restock stocks that had been depleted during the pandemic. The report attributes the remainder to disruptions to shipping operations which have been disrupted by issues such as port congestion.

“During the Great Recession, prices didn’t react that much,” said Fernando Leibovici, economist with the Fed Bank of St. Louis, who co-wrote the report with research associate Jason Dunn. During the pandemic, he said, “there is certainly a role played by supply factors.

The report is one of the latest in a series of attempts by economic policymakers to assess the impact of tensions on the supply chain after nearly two years of turmoil during the pandemic, as issues ranging from commodity costs to base and availability of raw materials to transport costs have affected the global economy.

Economists at the Federal Reserve Bank of New York, writing on the bank’s Liberty Street Economics blog this week, developed a global supply chain pressure index bringing together a series of metrics “to provide a more comprehensive summary of potential disruptions affecting global supply chains. “

Their measurement, using data dating back to 1997, showed supply chain pressures swinging dramatically during the pandemic well beyond long-term trend lines and reaching a new high in October 2021. A setback from that peak the following month “seems to suggest that pressures on the global supply chain, while still historically high, have peaked and may start to moderate somewhat in the future,” said writes New York Fed economists.

Various measurements of the shipping industry show that shipping prices have climbed over the past year to record highs. The global price of shipping a 40-foot container has risen from around $ 1,400 at the start of the pandemic to over $ 11,000 in September, according to an index from shipping technology company Freightos.

Chris Rogers, senior supply chain economist at freight forwarder Flexport Inc., said the St. Louis Fed study shows that “we are firmly in uncharted territory when it comes to rate hikes. “

He said the main driver of the rate hike remains strong consumer demand for goods that overwhelms transportation networks. “If it was just a port closure here or there, or just a trucking shortage here or there, you wouldn’t have seen anything close to the kind of challenges or rate increases that we actually saw it, ”Mr. Rogers said. .

(Write to Lydia O’Neal at [email protected])

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