The pandemic curse that had inflicted gravity around the world and the global economy had also resulted in supply constraints. Considering the strict closures that have been imposed in various other countries around the world, this has led to the supply ecosystem being severely disrupted. This had led to a shortage of goods and services in various other economies. It has also been particularly difficult due to the fact that the global economy functions and relies heavily on trade and globalization.
Thus, the supply bottleneck posed new challenges for the weavers of politics. This is indeed a new challenge as it has been deciphered that global supply constraints are quite high and supply routes are not flexible and there is a need to work for similar future challenges. Now, given the latest spread trend of the delta variant, it is once again entirely possible that the supply issue will happen again next year.
Supply chain bottlenecks have effectively disrupted shipments and disrupted production at factories in parts of Southeast Asia.
It should be noted that such an odious supply constraint will lead to high prices in the economy. This is due to the categorical fact that the makers of the economy are obnoxiously reeling from shortages of essential components. Such components involve high energy costs and higher raw material prices due to low availability.
Such shortages effectively force bidders and manufacturers to wage wars for space on ships. This, in turn, pushed freight rates to an all time high and caused some shippers and manufacturers to raise the price of the goods they sell.
While consumers are hit the hardest, it should be noted that manufacturers suffer from unconventional circumstances where it is quite difficult to source components and containers that drive up costs insanely.
To put nascent inflation in perspective, it should be noted that according to reports, the cost of magnets themselves has increased dramatically by around 50%. Moreover, such a price increase has been observed since March, which effectively increased the cost of production by a whopping 7%.
DISEASES OF CHINA
It is not news that China has worked hard and diligently to eradicate the common enemy that many believe it has invented. Given the resurgence that can be observed in China, it should be noted that even a small number of trips in cases can wreak major havoc on trade.
This is effectively due to the no-frills fact that in order to control the spread of the virus, mobility will need to be brought under control, which will consequently lead to supply chain disruptions. In fact, in its quest to cope with the crisis, China temporarily closed part of the world’s third-busiest container port in Ningbo this month.
The shutdown lasted two weeks after the discovery of a single case of the delta variant. dockworker turned out to have the delta variant.
This problem articulates perfectly the problem of port congestion and a severe shortage of container transport which will cause the transport or cost of sending a sea container from Asia to Europe about 10 times more expensive.
Rampant inflation: a problem
The disruption caused by supply chain issues is not limited to manufacturers, but also to consumers. It should be noted that the shift from cost to consumers has started on a larger scale. Thus, effectively higher freight rates or semiconductor prices could actually exacerbate already bad inflation in various economies.
These equally odious inflationary threats have in fact led US forecasters to revise their growth projections considerably downwards or downwards for this fiscal year.
In addition, analysts have also raised their inflation expectations for fiscal 2022. According to reports, if a comparison is made with last year’s personal consumption expenditure index, it is now expected to increase significantly. of 4%. It is worth noting that such an increase will be observed in the third quarter itself and in the fourth the hateful expectations stand at 4.1%.
The political enigma
It is not news that various countries around the world view rising inflation as transient in nature. The two greatest examples of the same are China and the United States. According to the central banks of these countries, inflation is transient in nature and there is no need to worry.
Thus, higher liquidity and an accommodating monetary position were adopted by everyone to revive the economy. This is in direct conflict with anti-inflation policy, as growth and inflation in the economy face a trade-off.
Thus, the situation presents a rather difficult choice for the nations as to know if they should privilege the growth or fight against inflation.
on the other hand, the immense diffusion of the delta variant, particularly in South-East Asia, complicates the already complicated situation.
This has led to many factories not functioning at all. To deal with the situation in Vietnam, which is a major manufacturer of goods and also the world’s second largest producer of clothing and footwear, the government has effectively ordered manufacturers to allow workers to sleep in their factories. This has been done and keeps exports moving.
So what is most crucial for policymakers is that the need to make global trade routes robust and resilient is quite high. Given the need of the hour, the failure of supply constraints poses the greatest threat not only to manufacturers but also to consumers. Thus, strategic partnerships aimed at reorganizing global supply constraints can make globalization and trade more efficient.
Edited by Sanjana Simlai.