Consumers were panic-buying a year ago, as the pandemic ravaged country after country and economies shuddered. Companies are frantically trying to stock up, now that the economy is on the mend. From mattress manufacturers to vehicle manufacturers to aluminium foil producers, everyone is buying more material than they need, to keep up with the rapid recovery of demand for goods, and to alleviate the fundamental dread of running out. Supply chains are on the verge of collapsing as a result of the frenzy.
Shortages, transit bottlenecks, and price spikes are nearing all-time highs, raising fears that an overheated global economy will stoke inflation. Girteka Logistics, Europe's largest trucking fleet, says it's been difficult to find enough capacity. Monster Beverage Corp., based in Corona, California, is experiencing a shortage of aluminium cans. MOMAX Technology Ltd. of Hong Kong is delaying the release of a new product due to a shortage of semiconductors.
An unusually long and growing list of calamities that have rocked commodities in recent months is exacerbating the situation. In March, a freak accident in the Suez Canal slowed global shipping. Drought has wreaked havoc on crop production.
In February, a deep freeze and widespread blackout, shut down energy and petrochemical operations across the central United States. Hackers took down the country's largest fuel pipeline less than two weeks ago, pushing gasoline prices above $3 per gallon for the first time since 2014. Now, India's largest ports are under threat from a massive Covid-19 outbreak.
Consider the Logistics Managers' Index, a relatively obscure US economic indicator, for anyone who thinks it'll all end in a few months. The index is based on a monthly survey of corporate supply chiefs that asks them about inventory, transportation, and warehouse costs — the three key components of supply chain management — now and in the next 12 months. The current index is at its second-highest point since records began in 2016, and the future indicator shows little relief in a year's time. In the past, the index has been unnervingly accurate, roughly matching actual costs 90% of the time. A growing number of experts are predicting that inflation will accelerate. Global capitals, central banks, factories, and supermarkets have all felt the tremors as a result of the threat. The Federal Reserve in the United States is facing new questions about when it will raise interest rates to combat inflation, and the perceived political risk has already thrown President Joe Biden's spending plans into disarray.
In India, things are not looking any better. On Monday, Oxford Economics, a global forecasting firm, revised India's GDP growth forecast for 2021 from 11.8 percent to 10.2 percent, citing the country's increasing healthcare burden, dwindling vaccination rate, and lack of a convincing national strategy to contain the pandemic. Despite the likelihood of further mobility restrictions, Oxford Economics expects India's targeted lockdown approach, less stringent restrictions, and resilient cons. India's economy is expected to grow at a rate of 12.5 percent in 2021, according to the IMF, and 11 percent in the current fiscal year, according to S&P Global Ratings.
Furthermore, the pressures can be traced all the way back to the global raw material output, and they may persist, because, increasing the capacity to produce more of what's scarce — whether through additional capital or labour — is slow and costly.
Lumber, copper, iron ore, and steel prices have all risen in recent months as supplies tighten in response to increased demand from the world's two largest economies, the United States and China. Crude oil is also rising in price, as are industrial materials such as plastics, rubber, and chemicals. Some of the price hikes have already made their way to store shelves.
Food prices are also rising. The world's most popular edible oil, made from the fruit of oil palm trees, has increased by more than 135% in the last year, setting a new high. For the first time since 2012, the price of soybeans surpassed $16 per bushel. Corn futures have reached an eight-year high, while wheat futures have reached their highest level since 2013.
Some economists are concerned that the economy will become overheated, resulting in inflation. They cite input and transportation service shortages. Furthermore, despite the fact that employment remains far below the level of a year ago, businesses have complained that they are having difficulty finding workers to fill open positions. In addition, many women have left the workforce to care for children who attend school online. Many of those women will likely return to work once their children return to school.
"We're still optimistic about the global economy," said lead author Hamid Rashid, chief of the United Nations Department of Economic and Social Affairs' Global Economic Monitoring Branch. "However, there are a number of uncertainties that we highlighted in our report, particularly the spread of vaccination and coverage that must occur in the next six months to achieve the growth rate that we project here," he stated from the report.
The United Nations predicts that the global economy will grow by 4.7 percent in 2022, which is higher than the IMF's forecast of 4.4 percent.
Hence, it is important to realize the greatest chance of achieving public health goals and enabling a robust global recovery is through global coordination and cooperation—both of the measures needed to slow the pandemic's spread and of the economic actions needed to alleviate the economic damage, including international support.
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