According to the recently released IHS Markit Purchasing Managers’ Index (PMI) report--which indicates the overall health of global economies, average supplier delivery times have lengthened to record levels. Many of us have felt these delays, as it has taken longer and longer to get certain items.
Data: IHS Markit; Chart: Axios Visuals
x-axis: PMI y-axis: year
What is the cause: The economic rebound since spring of last year has been accompanied by surging demand for finished goods. There is still not enough supply of many of the parts needed to complete the manufacturing process (ex: computer chips), and supply chain issues are persisting with new COVID variant outbreaks disrupting manufacturing around the world. Adding to this, shipping continues to struggle with logistical issues stemming from the pandemic.
Why it matters: Businesses are struggling to get stuff delivered from their suppliers, and it’s having an impact on economic growth and inflation.
- U.S. manufacturing growth slowed to a four-month low, and services growth decelerated to an eight-month low.
- New orders are outpacing manufacturing output, which has helped to drive inflation as prices charged by U.S. producers reached a new record high
Despite these concerns, U.S. companies remained upbeat regarding the outlook for output over the coming year…it just may take longer…and cost a bit more. But this is unlikely to have a major impact on most economies and markets. And competitive pressures should drive solutions to these shortages and supply chain challenges.
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