Supply chains around the world continue to slowly recover from the pandemic, but volatility and inflation issues remain a concern. Port congestion, which was much higher during the mid-pandemic period, has slightly increased in March. There have been some positive signs and we have recently upgraded our global GDP forecast from 1.5% to 1.8%, but that recessionary risks remain, even if the timing is uncertain, reports Maersk.
Market Trends
PMIs(Purchasing Manager’s Index) suggest that growth momentum has improved slightly in early 2023. The global composite PMI began to rise in January, and this trend has continued through March. Both manufacturing and services are driving this upward trend as China continues to reopen and energy prices have fallen. Manufacturing orders-to-inventory ratio remains unchanged in March, but manufacturing export orders fell slightly.
The United States headline inflation rate has peaked at 5%, slowing for the ninth consecutive period and settling below the previous market forecast of 5.2%. The squeeze on consumer purchasing power should fade, but core inflation, excluding food and energy, remains high. It is currently uncertain when this will come down to the Federal Reserve’s inflation target of 2%.
Meanwhile, the European headline inflation rate has also peaked, and consumers will benefit from the overall inflation coming down. However, core inflation (excluding energy and food) is still at a record high.
A focus on cybersecurity in the supply chain
Malicious cyber-attacks have been around for years, but targeting supply chains is a new area of emphasis for hackers. Cyber-attacks against supply chains have increased by 742% over the last three years. The average cost of a supply chain cyberattack is USD 4.35 million, meaning companies need to remain aware of the risks and countermeasures associated with this threat. According to a McKinsey report, 93% of supply chain executives are actively working to make their supply chain more resistant to cyberattacks, yet only 21% feel that their current supply chain is highly resilient.
Manufacturing, retail and healthcare are the industries most frequently targeted for these attacks, but any industry involved in logistics can be at risk. Additionally, companies in Asia experienced a disproportionate amount of these strikes, accounting for 25% of global supply chain cyberattacks.
To counter the rising cyber security threat, global spending on security is expected to rise another 12.3% in 2023, reaching USD 219 billion.
Risk factors to remain aware of: Much like any other area of the supply chain, companies can avoid losses by remaining aware of potential risk areas. For cyberattacks, the following weaknesses are most often exploited.
Third-party risk: Many supply chains are fragmented, relying on a combination of third-party suppliers, vendors, agents and partners to manage the logistics process. Each of these parties represents a potential entry point for cybercriminals, making a company’s choice of partner more important than ever. This also serves to highlight the benefit of an integrated supply chain, as minimizing the number of links in the chain can mean a lower risk of a partner experiencing a security breach.
Inside risk: Employees and contractors often have access to sensitive information, which can lead to accidental or malicious leaks. An excellent digital supply chain management platform is the best way to manage this risk, as a well-designed platform will feature both access controls and monitoring.
Legacy systems: A large number of cyberattacks occur through the use of outdated or unpatched software in the supply chain. This creates an easy entry point for hackers, who are able to exploit security holes that could have been easily avoided. The easiest way to mitigate this risk is to ensure both your company and your partners stay on top of new software updates, finding viable alternatives if the developer no longer supports your current software.
Trade Outlook
The expected economic downturn seems to have been delayed. As of now, the first quarter of 2023 has been better than initially expected. Falling energy prices, a warm winter and China’s rapid reopening are the key drivers for this. We have revised our global GDP growth forecast for 2023 from 1.5% to 1.8%.
However, it is essential to note that only the timing has changed. The overall economic outlook for 2023 remains weak, with a low projected growth. Several risks could contribute to a downturn, including financial instability, sticky inflation, geopolitical risks and potential recession in Western economies.
We are keeping a close eye on two significant economic factors: consumer activity and manufacturing. Consumption is moving sideways, and the production of goods remains depressed. The question is, will consumer goods consumption collapse, and if so, when? We have seen US consumer demand holding up in the first quarter, but global manufacturing activity remains weak due to high inventories and low confidence in future consumer demand. This situation creates massive volatility for both ocean and air transport, while warehousing remains less dynamic. There are two areas of transition that have the ability to effect change over future patterns for trade and supply chains in the future: nearshoring and climate policy.
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Source: Maersk
