|Key Point: “The supply-chain crisis appears to finally be reversing course. Call it this year’s Christmas miracle. […]
“The latest signals serve as a light at the end of the tunnel for businesses and consumers alike. The widespread shortages are turning into surpluses, and Americans could soon see more discounts and sales than inflation-linked price hikes.”
Business Insider: Key indicators hint the supply-chain crisis is over and inflation will cool off soon
The supply-chain crisis appears to finally be reversing course. Call it this year’s Christmas miracle.
After months of supply shortages and “out-of-stock” warnings, the November survey hints at a rebound in inventories.
A popular leading indicator for business activity suggests the trend will continue into 2022. The Institute for Supply Management’s Chicago Business Barometer showed inventories — how much product businesses hold in reserve — soaring to their highest levels since 2018 in November, with some companies saying they stockpiled goods to counter supply-chain issues. Order backlogs slid 6 points below the 12-month average, and new orders dropped to their lowest level since February.
Put simply, manufacturers are picking up the pace and companies are ordering less from factories. That data join signs of bottlenecks easing in the global supply-chain mess. Transportation issues “were still the greatest constraint within supply chains” last month, but logjams and shipping costs improved from October’s levels, Oren Klatchkin, lead economist at Oxford Economics, said in a Monday note.
If trends in the manufacturing surveys hold true, the US could see a wave of supply hit stores in a matter of months. That could be the silver bullet for ending pandemic-era inflation. An influx of inventories could soften new orders from factories, since companies will want to offload their stockpiles before buying more goods. A sudden jump in supply would also dissolve the strains that were leading businesses to raise prices. With shelves restocked, companies shrinking their orders, and ports processing backlogs, the forces lifting prices higher would likely fade.
The pivot also bodes well for the broad economic recovery. Goldman Sachs economists lifted their forecast for fourth-quarter economic growth to 6.5% from 6% on Saturday, citing stronger inventories and “progress toward unclogging ports.”
Still, the latest signals serve as a light at the end of the tunnel for businesses and consumers alike. The widespread shortages are turning into surpluses, and Americans could soon see more discounts and sales than inflation-linked price hikes.