Global supply chain disruptions are easing rapidly as shipping logjams are cleared and consumer demand growth softens. Given that supply chains bottlenecks were a key factor behind the surge in inflation last year, the unwinding of these blockages bodes well for core goods price disinflation. Several indicators point to a normalisation in supply chain conditions with some already back at pre-pandemic levels.
For instance, the cost of shipping a standard-sized container from China to the US west coast increased from USD1,400 per FEU (forty-foot equivalent unit) before the pandemic to a peak of almost USD21,000 last September but this has now dropped to just over USD2,500. Notably, the decline in freight cost has accelerated, particularly since August. The time taken to transport goods from China to the US has also improved. At the peak of the blockages in April of this year, it took about 115 days to move goods from the point at which cargo is ready to leave the exporter to when it is collected from its destination port. Fewer ships, Covid-19 restrictions on port staff and a shortage of truckers resulted in long delays in deliveries. By mid-October, from point-to-point container delivery time had fallen to 82 days.
