- Article
- Global Research
- Future transport
The new normal
Are supply chain disruptions here to stay?
One step forward, two steps back? Just when it looked as though supply chain disruptions might be easing, exporters and importers have been hit by a fresh wave of challenges, including high inflation, port worker strikes (e.g. at Felixstowe in the UK), and recent low water levels in Germany, begging the question: is ongoing disruption the “new normal” for supply chains?
Supply strains easing. We previously argued that pandemic-related supply chain strains could start to ease in the second half of 2022 and, for the most part, that is playing out. Global supply chain pressures, as measured by the New York Fed’s index, hit an 18-month low in July, and global spot container freight rates are down nearly 50% from their pandemic peak. Commodity prices too are coming off the boil, but remain elevated.
Pandemic-related supply chain strains continue to ease
Commodity prices continue to rise. Over 650,000 tonnes of grain (mainly corn) have been exported from Ukrainian ports so far this month under a safe-passage deal, while gas flows via the Nord Stream pipeline are currently tracking at around 20% of full capacity as at 23 August 2022 and will cease for three days from 31 August for further (previously unscheduled) maintenance. And surging energy costs are impacting trade balances: the UK goods and services trade deficit widened to the largest on record (GBP27.9bn) in Q2 2022, while Japan’s goods trade deficit hit an all-time high in July (JPY2.1trn). However, some countries, including Norway and Canada, are benefiting from higher prices for their energy exports.
Leading indicators are pointing to a potential slowdown in trade. Global new export orders declined for the fifth consecutive month in July, while the US National Retail Federation expects containerised retail import volumes to fall by 2.3% y-o-y over August to December (i.e. during peak container shipping season). New export orders for Taiwanese electronics also tumbled in July as customer inventories continued to grow.
Data mining earnings calls. And these trade issues, along with recessionary concerns, remain top of mind for businesses. Natural Language Processing analysis by our Data Science team finds that “inventory” and “freight” were key topics in recent company earnings calls, while discussions around “shortages” have become less prominent for North American firms – perhaps indicative of some normalisation in supply chain strains post-pandemic.
Key terms in discussions on “supply chain” in Q2 2022 earnings calls
Therefore, it looks as though ongoing disruption might just be the new normal, for now.
First published 25 August 2022.
Click here* to read the free to view note highlighting some key charts.
To find out more about HSBC Global Research or to become a subscriber get in touch at askresearch@hsbc.com.
* Please note that by clicking on this link you are leaving the HSBC Global Banking & Markets website, therefore please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.
Global Research
HSBC Global Research provides information, insights and thought-provoking ideas.