Shipping Delays and Global Export Orders
In July, the Global Manufacturing PMI, sponsored by J.P. Morgan and compiled by S&P Global Market Intelligence, revealed that worldwide supply chains were increasingly impacted by shipping delays. These delays led to reduced global export orders and heightened production costs due to higher shipping rates. The effects of these rates on production costs will need close monitoring in the coming months.
Increased Shipping Delays Due to Geopolitical Events and Climate Change
Geopolitical events and climate changes have contributed to disruptions in global shipping, causing manufacturers to report increasing delays in the supply of inputs to factories. PMI survey data from S&P Global includes qualitative evidence from companies on changes to key business metrics. During the pandemic, shipping delays reached nearly 12 times the long-run average in causing longer supplier delivery times. By early 2023, shipping-related delays had nearly normalized, but 2024 has seen renewed disruptions. Factors include low water levels in the Panama Canal and Houthi rebel attacks in the Red Sea, which have extended shipment times by up to two weeks. In July 2024, shipping delays were nearly four times the long-run average, significantly impacting supplier delivery times.
Export Losses Due to Shipping Delays
Shipping delays have not only lengthened supplier delivery times but have also caused a rise in manufacturers reporting a drop in new export orders in July. The number of manufacturers affected is nearly five times the long-run average, marking a significant impact on global trade and economic growth at the start of the third quarter. As a result, global new export order volumes saw a slight decline for the second consecutive month in July.
Higher Shipping Rates and Increased Production Costs
Higher shipping rates have contributed to increased manufacturing production costs, reaching levels not seen since February. While other factors such as energy costs and raw material prices are having a below-average inflationary impact amid weak demand, labor cost inflation remains modestly above the long-run trend. The overall inflationary impact from shipping remains modest, with global factory input cost inflation dipping slightly in July. However, this trend needs monitoring as central banks look for assurances of moderating inflation pressures.
Variances in Supply Chain Disruptions
The extent of supply chain disruptions varies worldwide. In the eurozone, supplier delivery times quickened on average in July, contrasting with a global trend of slower lead times. Faster delivery times were noted in Germany and Austria, while Greece, Spain, the Netherlands, Italy, and France experienced slower deliveries. Significant supply chain lengthening was reported in Australia, Taiwan, Mexico, Russia, Brazil, the UK, Canada, and South Korea, with fewer delivery issues in the US and Japan.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: S & P Global
