Global Supply Pressures Eased In February, New York Fed Says

Global supply chain pressures eased in February as backlogs and delivery times improved in several key markets and a measure of ocean shipping costs declined, according to new data from the New York Federal Reserve released on Thursday.

The New York Fed's supply chain pressure index, first published in January to measure the coronavirus pandemic's impact on global production troubles and prices, remains at a historic high.

But from a peak of 4.5 in December, it has fallen over consecutive months and hit 3.3 in February, with 0 representing the index's long-term average. The index combines measures of shipping costs, delay times, and order backlogs in the United States, the euro zone, the United Kingdom, Japan, China, Taiwan, and South Korea.

The improvement, NY Fed analysts noted, was broad across areas of the world and categories.

If that continues, it could represent an important turning point for the Federal Reserve and other central banks in the their efforts to control inflation.

Policymakers have attributed much of the recent rise in prices to world supply chain problems. If those problems improve over time, inflation may ease with relatively less effort by central banks to address the issue by curbing demand through higher interest rates.

"The lessening of supply chain pressures has been widespread ... which is a welcome development in terms of reducing global supply chain disruptions," the analysts said.

Improvements in outbound shipments from Asia and to delivery times in South Korea and the United Kingdom contributed among the most to the decline in the index, while some components in the United States, including order backlogs, got slightly worse.

Still, the overall index for the United States also declined to 2.63, after hitting a peak of 2.99 in January.