- A freak accident in the Suez Canal backed up global shipping in March. Drought has wreaked havoc upon agricultural crops.
- A deep freeze and mass blackout wiped out energy and petrochemicals operations across the central U.S. in February.
- Less than two weeks ago, hackers brought down the largest fuel pipeline in the U.S., driving gasoline prices above $3 a gallon for the first time since 2014.
- Now India’s massive Covid-19 outbreak is threatening its biggest ports.
A recent Yahoo Finance news sources says that the world economy is suddenly down.
What the expert says?
To Zac Rogers, who helps compile the index as an assistant professor at Colorado State University’s College of Business, it’s a paradigm shift.
In the past, those three areas were optimized for low costs and reliability.
Today, with e-commerce demand soaring, warehouses have moved from the cheap outskirts of urban areas to prime parking garages downtown or vacant department-store space where deliveries can be made quickly, albeit with pricier real estate, labor and utilities.
Once viewed as liabilities before the pandemic, fatter inventories are in vogue. Transport costs, more volatile than the other two, won’t lighten up until demand does.
“Essentially what people are telling us to expect is that it’s going to be hard to get supply up to a place where it matches demand,” Rogers said, “and because of that, we’re going to continue to see some price increases over the next 12 months.”
Increased costs
More well-known barometers are starting to reflect the higher costs for households and companies.
An index of U.S. consumer prices that excludes food and fuel jumped in April from a month earlier by the most since 1982.
At the factory gate, the increase in prices charged by American producers was twice as large as economists expected.
Unless companies pass that cost along to consumers and boost productivity, it’ll eat into their profit margins.
Inflationary pressures
Policy makers, however, have laid out a number of reasons why they don’t expect inflationary pressures to get out of hand.
Fed Governor Lael Brainard said recently that officials should be “patient through the transitory surge.”
Among the reasons for calm: The big surges lately are partly blamed on skewed comparisons to the steep drops of a year ago, and many companies that have held the line on price hikes for years remain reticent about them now.
What’s more, U.S. retail sales stalled in April after a sharp rise in the month earlier, and commodities prices have recently retreated from multi-year highs.
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Source: Yahoo Finance
