Global supply chain disruptions lead producers to markup output cost; IIF

By Amirtha P S, Desk Reporter
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Trade
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Nearly 70 percent of countries across the globe face severe supplier delivery delays, which in turn is seeing manufacturers increasingly marking up their output prices, the Institute of International Finance (IIF) said.

According to IIF’s Global Macro Views report of April, which analyses data on supplier delivery times for all major economies from the manufacturing purchasing managers’ index, the supplier delivery delays in the US and German manufacturing sectors are almost as severe as in Japan in 2011 after the Fukushima nuclear disaster.

“Firms are increasingly marking up output over input prices on a global scale, not just in the US. All this points to supply chain disruptions and their knock-on effect for inflation being a medium-term shock. That may complicate life for central banks,” the IIF said.

Due to the very high consumer and industrial demand, a global shortage of container capacity and low service reliability from container shipping companies, the supply chains across the world have become highly vulnerable to even the smallest of external shocks, credit rating agency Moody’s Investors Service said earlier.

However, global trade is set to improve after a rebound in the second half of last year due to pent-up demand for consumer durables from advanced economies and the resumption of supply chains in emerging markets, according to the International Monetary Fund (IMF).

Trade is forecast to expand 8.4 percent this year and 6.5 percent next year after shrinking 8.5 percent in 2020, according to the IMF’s estimates.

As COVID-19 vaccination spreads globally, it is likely that delivery delays will remain acute for some time, making this a medium-term shock that may complicate life for the world’s central banks, the IIF report said.

Related: Recovery of GCC tourism sector will be faster than other MENA countries; IIF


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