Big business chiefs warn that supply chain problems and inflation are here to stay
A truck transports a shipping container at the Port of Savannah, Georgia. The supply chain crisis has left nearly 80,000 shipping containers piling up at this port, the third largest container port in the United States, with about 20 ships moored off the Atlantic coast, waiting to unload their cargo.
Paul Hennessy | Light Rocket | Getty Images
LONDON – Senior executives of several major European companies have told CNBC supply chain problemsEmployment shortages and inflationary pressures will last longer than policy makers expect.
The latest recent inflation data has done little to allay fears about steadier inflation. US Consumer Price Index jumped 6.2% in October last year, official figures revealed on Wednesday, the highest annual rise in 30 years and well above the US Federal Reserve’s target.
China’s PPI inflation rose 13.5% annually in October, while the US PPI grew by 8.6% annually, an all-time record.
Companies around the world are grappling with supply chain bottlenecks as post-pandemic demand converges with industrial production struggling to catch up after prolonged COVID-19 shutdowns.
Ahold Delhaize CFO Natalie Knight told CNBC on Wednesday that while she was confident in the Belgian-Dutch grocer’s strategy to deal with such pressure, it showed no sign of waning.
“I think what we’re definitely seeing is inflation going up, but what I would also say is when you look at food, it’s a smaller share of the portfolio than some of the other categories, and we certainly see other areas where inflation seems to be a lot higher than in our industry,” Knight said.
Knight suggested that higher consumer prices will continue through the fourth quarter. She said Ahold Delhaize was working to ensure the price increases were not passed on to customers.
“We’re working with vendors, we’re working with economists to make sure we have the right models that should cost, so we can really accept prices that are absolutely necessary,” she added.
On employment, Knight said the company has noticed a divergence between strong supply in Europe, which has returned to pre-Covid levels, and the United States, where there are “hurdles in the way” in terms of hiring. She also said that there are certain “pressure points” in the labor market, particularly in transportation and distribution.
“I think our vacancy rates are pretty consistent, but we’re working even harder to keep it that way,” Knight added.
Policy makers across major central banks They have largely stuck to the line that a period of high inflation in their respective economies, and the global supply problems that feed into them, is a “transient” period. However, many companies have warned of mounting cost pressures in their third-quarter earnings reports in recent weeks.
Managing Supply Problems “A Core Competence”
Supply chain problems in different parts of the world have been exacerbated by various geopolitical factors. For example, power shortages in China have affected production in recent months, while in the United Kingdom, Brexit has been a major contributor to the shortage of truck drivers and agricultural workers.
However, it echoed concerns about the persistence of these problems Siemens Energy CEO Christian Bruch, who told CNBC on Wednesday that the industrial world will be dealing with this “for some time.”
“It will be the road to 2022 and frankly, I think supply chain management is going to be something that will be with us for [a long time],” He said.
“It would really be a core competence for companies like us, making sure that you can manage this scarcity and issues on the supply chain, not only on the physical side but also on the logistical side.”
Brusch said the energy industry in particular will need to improve its management of shortages, given the growing demand for raw materials needed for the promised transition toward renewables.
Inflationary pressures once every two decades
In the UK, inflation unexpectedly slowed to 3.1% annually in September, but analysts expect this to be a short respite after August’s 3.2% rise was the sharpest since records began in 1997.
The Bank of England It expects consumer price inflation to reach 5% before declining by the end of 2022 and into 2023, but Standard Chartered CEO Bill Winters recently told CNBC that his bank’s recent experience suggests high inflation has become structural.
“I see wage pressures pretty much everywhere we go, we see labor shortages, and of course there are friction costs, which will have to settle themselves over time, there are energy prices, which I think are going to remain high for some time because economic activity,” Winters said.
“This tells me that inflation expectations are becoming ingrained.”
next UnileverResults In late October, chief executive Alan Job said the British consumer goods giant was experiencing “once in every two decades inflationary pressures.”
“We are seeing commodity inflation across every type of our input cost – agricultural commodities, petrochemical commodities, paper and cardboard, transportation and logistics, energy and labor – all moving in an upward direction,” he said.
“Our first reaction is to launch our productivity programs and try to save as much money as possible and avoid bearing prices, but that’s one time inflationary pressure in two decades and so we raised prices.”