Supply Chain Bottlenecks Are Easing, Taking Pressure Off Prices

Global supply chain pressures have been showing signs of easing, a trend that should translate into less pricing pressure on goods in the months to come.

Compared with before the pandemic, ports and warehouses are still congested, and companies are still contending with shipping rates and delivery times that remain much higher than normal. Still, this more smoothly functioning supply chain is likely to provide one source of relief for an economy that is still struggling with rapid inflation. Elevated demand along with persistent shortages and delayed deliveries for some products have helped push up the prices of cars, toys, furniture, food and other goods.

Inflation data released Wednesday morning showed prices of some goods beginning to cool. The cost of apparel fell 0.1 percent from the previous month, as the prices of men’s shoes, women’s coats and baby clothes all declined. The price of major appliances dropped 2.2 percent, while jewelry dipped 1.2 percent.

Other goods, like women’s dresses, living room furniture and household paper products, saw their prices continue to rise.

“It’s a massive traffic jam that is now unclogging,” said Phil Levy, the chief economist at Flexport, a freight forwarder.

The cost of moving goods has retreated in recent months from stratospheric highs last year. For example, importers are now paying about $6,632 on the spot market to move a 40-foot container from China to the U.S. West Coast, compared with $18,346 at this time last year (but still significantly more than the $2,900 two years ago), according to data from Freightos Group. Average delivery times on the same route are currently about 74 days, down from a peak of 99 days in January.

An index of global supply chain pressures created by the Federal Reserve Bank of New York also shows that pressures have trended down since December.

While shipping rates are still high and ports are still busy, “broadly, it is clear that we are on a vector of normalization,” said Eytan Buchman, the chief marketing officer for Freightos.

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