New York CNN –
White House officials on Thursday welcomed the de-listing of supply chains, suggesting further easing of tightening will help cool inflation.
The double whammy of the Covid pandemic and Russia’s invasion of Ukraine brought fragile supply chains to the brink of breaking point. This supply shortage caused consumer prices to skyrocket, some store shelves were almost empty and online mail-order orders were significantly delayed.
Many indicators now show that supply chains have largely recovered from the recent shocks.
“Critical supply chains are significantly more fluid and resilient than when the president took office,” White House officials wrote in a supply chain scorecard first shared with CNN.
The report, which comes exactly two years after a 100-day review launched by the Biden administration to address critical supply chain vulnerabilities, found that “significant progress” had been made in implementing the recommendations.
“President Biden’s work to increase the stability and resilience of our supply chains has helped bring down core inflation and give working families breathing room,” Lael Brainard, director of the National Economic Council, told CNN.
The Biden administration cited a number of indicators that paint the picture of supply chains that have rallied significantly.
For example, ports handled record amounts of cargo in both 2021 and 2022. The backlog of ships damming ports, once a symbol of the supply chain crisis, has all but disappeared.
Consumers are no longer confronted with half-empty store shelves. About 92% of goods in grocery and drug stores are now in stock, the scorecard said, citing statistics from IRI. This is not only significantly better than the worst phase of the supply chain crisis, but even slightly better than the pre-Corona average.
Shipping costs, which skyrocketed in 2021, have fallen about 90% from their peak, the report said.
Independent metrics also suggest that supply chain stress is easing. The New York Federal Reserve’s global supply chain pressure index rose to record highs in 2021 but has since returned to pre-coronavirus averages.
“Key supply chain indicators are now fully back to 2019 levels,” Torsten Slok, chief economist at Apollo Global Management, wrote in a recent report.
Although supply chain stress related to Covid has eased, new risks have emerged.
Notably, hundreds of thousands of UPS workers could this week authorize a strike that threatens to paralyze the world’s largest parcel courier. Work stoppages are already a concern in West Coast ports, where ships are beginning to backlog.
In the scorecard, the White House argued that its focus on supply chain resilience and working with industry helped alleviate the bottlenecks.
According to the scorecard, more than 70 recommendations from the 2021 supply chain report have been implemented so far, including providing finance to accelerate the battery supply chain, using the Defense Production Act to diversify supply chains and accelerating computer chip manufacturing.
White House officials said the private sector has committed to investing more than $470 billion in manufacturing of semiconductors, electric vehicles, electric vehicle batteries, clean energy, and pharmaceutical and medical products.
“As global supply chains have gradually recovered from the disruptions of the pandemic and commodity markets, inflationary pressures on core commodities have eased significantly,” the White House Council of Economic Advisers wrote in a blog post first shared with CNN.
As a “strong sign of supply normalization,” the blog pointed to a closely watched metric of slower delivery times in the Institute of Supply Management Manufacturing Survey. After hitting a record high in May 2021, this supply chain pressure indicator has been below its pre-Corona average since December 2022.
All of this is encouraging news for consumers struggling with the high cost of living.
White House economists said it was a “positive development for consumers” and struck a tone of hope that will last. The blog post states that there is a high correlation between producer prices and supply chain pressures, suggesting that easing supply chain pressures could continue to cool inflation.
Of course, the inflation problem has not gone away. Consumer prices are still rising much faster than what the Federal Reserve considers normal.
Although commodity prices have cooled, White House economists admitted “we still have a lot of work to do on headline inflation.”