Fed Survey Reveals Supply Chain Woes
While supply chain disruptions have certainly improved since the height of Covid, a survey conducted in May by the Federal Reserve Bank of New York indicates that progress has stalled in the last few months. The report reveals that “Roughly a quarter of service firms and 43 percent of manufacturers said that supply disruptions were impeding business activity.”
In response to some of these ongoing disruptions, many firms have resorted to raising prices. The survey notes that “Twenty-three percent of service firms and 38 percent of manufacturing firms raised selling prices.” Despite these challenges, the impact on employment remains minimal. Less than 10% of the service and manufacturing firms reported reducing employment.
This corporate reluctance to reduce staff is understandable given the competitive labor market in recent years. The 2024 MHI Annual Industry highlights that the scarcity of labor is one of the enduring lessons from the pandemic. It states: “Post-pandemic, there was a huge surge in consumer demand but a shortage of workers to satisfy that demand.”
Additionally, a report from The Manufacturing Institute and Deloitte stresses the future challenges in manufacturing employment. It predicts that “By 2030, manufacturers will need to fill 4 million jobs, 2.1 million of which could go unfilled if we do not inspire more people to pursue modern manufacturing careers.”
Escalating Container Shipping Rates
One source of supply chain woes recently making headlines is the steady rise in shipping container rates. Tension in the Middle East and attacks on commercial ships have persuaded many companies to avoid the Red Sea. The World Bank blog writes that: “As of end-March 2024, the volume of traffic through the strategic Suez Canal and Bab El-Mandeb Strait has dropped by half, while the alternative route via the Cape of Good Hope route has witnessed a 100% increase in navigation.”
This Red Sea turmoil has contributed to the increased shipping rates. The WSJ reports this week that: “Ship diversions from the Red Sea helped push up container freight rates by roughly 30% in the past couple of weeks.”
