The global supply chain nightmare is about to get worse

The supply chain nightmare is raising prices for consumers and slowing the global economic recovery. Unfortunately, Moody’s Analytics warns that supply chain disruptions “will get worse before they get better.”

“As the global economic recovery continues to gain strength, what is increasingly clear is how it will be hampered by supply chain disruptions now appearing around every corner,” Moody’s wrote in a report on Monday.

In fact, the International Monetary Fund cut its 2021 US growth forecast on Tuesday by one percentage point, the highest of any G7 economy. The International Monetary Fund cited supply chain disruptions and weak consumption – which was driven in part by supply chain bottlenecks such as the lack of new cars amid shortages of computer chips.

“Border controls and restrictions on movement, the lack of a global vaccine permit, and pent-up demand to stay at home have combined to perfect a storm as global production will be disrupted because deliveries are not made in time, and costs and prices will rise,” Moody’s wrote in the report. The world will not be strong as a result.

Moody’s said the “weakest link” could be a shortage of truck drivers – a problem that has contributed to congestion at ports and has dried up fuel stations in the UK. Unfortunately, Moody’s warned that there are “dark clouds ahead” as several factors make overcoming supply limitations particularly difficult.

First, the company noted differences in how countries fight Covid, with China aiming for no cases while the US is “more prepared to live with Covid-19 as an endemic disease”.

“This presents a serious challenge to harmonize the rules and regulations under which transport workers move in and out of ports and hubs around the world,” the analysts wrote.

Grocery store shelves won't be back to normal this year

Second, Moody’s noted the lack of a “global coordinated effort to ensure the smooth operation” of global logistics and transportation networks.

Others are more optimistic about the supply chain outlook.

Jamie Dimon, CEO of JPMorgan Chase, said Monday that these supply chain hiccups will quickly fade.

“It won’t be an issue next year at all,” Dimon was quoted as saying by CNBC at a conference held by the Institute of International Finance. “That’s the worst part of it. I think great market systems will adapt to it as companies have done.”

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