American and European factories report an easing of pandemic-induced bottlenecks in the global supply chain even as the omicron variant looms, according to The Wall Street Journal (subscription).
Bottlenecks easing: Factories around the world grappled with record shortages in labor and supplies between 2020 and 2021, causing a surge in production costs and significantly driving up inflation—but in the past six months, U.S. delivery delays and input costs have softened significantly. There has been similar relief in production lines across Europe, with factories in the Eurozone reporting a deceleration in input costs since April, and smoother production in Taiwan has helped reduce some challenges in the semiconductor and electronics industries.
Some stagnation: Even as Taiwan pushed ahead, many Asian manufacturers saw little improvement. Indian factories report a sharp lag in wait times, while South Korean factories echo difficulties obtaining inputs and note the first drop in export orders since September 2020, citing rising COVID-19 infections in key overseas markets.
Looming challenges: The rapid spread of omicron may pose fresh issues for the supply chain if lockdown measures diminish the availability of labor and stymie production. At the same time, consumer prices in Europe rose at a record pace in November, dampening consumption potential. The European Central Bank revved up its forecast for average inflation from 1.7% to 3.2%; the ECB does not expect inflation to drop to its 2% target until much later in 2022.
Uncertainty reigns: “ECB President Christine Lagarde said last month the spread of the omicron variant brought added uncertainty to the outlook.”
- According to Lagarde: “It might have a dampening impact on demand, because people will consume less; people will go around less; people will be under restrictions, but it might also have an impact on the supply side as well.”