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Supply Chain Bottlenecks “Past The Peak”

While we are certainly not out of the woods yet, analysts from the Bank Of America are confident that “tentative” improvements in the supply chain suggest that the worst may be behind us.

“We are starting to see some signs of being past the peak in supply disruptions in the US,” said Bank of America economist Ruben Segura-Cayuela.

“Bottlenecks and broader disruptions dominated global supply chains through the back half of last year, with significant implications for manufacturing activity levels and goods price inflation.

“The timing of their unwinding is hence crucial for activity and price pressure normalisation.”

Despite the good news in the US, bottlenecks in Europe “appear to be peaking, but there is no sign of a clear turnaround yet,” Segura-Cayuela explained.

High energy costs have kept Europe from a similar recovery to the US. Segura-Cayuela said that “energy-related disruptions to supply remained high at the end of last year, keeping the supply disruption proxy very close to the 2021 peaks.”

Market prices for wholesale electricity and natural gas have been reduced since December, which the Bank of America believes will lead Europe to soon follow the US out of the worst of it.

“Given the relatively fast pass-through of market prices to corporate sector energy bills, we are somewhat hopeful that Euro area bottleneck signals will follow the US soon.”

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