GLOBAL SUPPLY CHAIN MESS TO GET WORSE, MOODY’S WARNS

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The tangled global supply chain is going to become even more knotted before it improves, Moody's warned on 11 October.

“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” the analytics firm said. 

“Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise, and GDP growth worldwide will not be as robust as a result,” Moody's wrote in the report. 

The supply chain’s “weakest link” is the shortage of truck drivers to move goods from ports to factories to warehouses to retailers, the report noted.

“You can open [the port of Los Angeles] for 24 hours a day and you still don’t have the truck drivers,” Joel Naroff of Naroff Economics told The Wall Street Journal.

Among the “dark clouds ahead” Moody’s sees:

  • differences in how countries respond to the COVID virus, with China aiming to eradicate any spread, the U.S. willing to live with a certain rate of infection and deaths, and other countries somewhere in between; “this presents a serious challenge to harmonizing the rules and regulations by which transport workers move in and out of ports and hubs around the world," the report said; 
  • a "concerted global effort to ensure the smooth operation" of the worldwide logistics and transportation network.

TREND FORECAST: As to how long the supply change will be bottled up is speculative. While it will stay tight for several months, we forecast it will loosen up when U.S. interest rates rise, the equities markets tumble and the economy slumps first into recession and then into Depression. 

Again, when the U.S. sneezes, the world catches a cold. Thus, when the U.S. stock markets and the economy crash, it will be a crash felt around the world. Therefore, demand for products and materials will decline and there will be no shipping backlogs. 

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