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Global Supply Chain Pressure Index: March 2022 Update

Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. In a January post, we presented the…

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Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. In a January post, we presented the Global Supply Chain Pressure Index (GSCPI) as a parsimonious global measure that encompasses several indicators used to capture supply chain disruptions. The main purpose of this post is to provide an update of the GSCPI through February 2022. In addition, we use the index’s underlying data to discuss the drivers of recent moves in the GSCPI. Finally, these data are used to create country-specific supply chain pressures indices.

Updated GSCPI

The chart below shows the GSCPI through February 2022, and it points to an easing in global supply chain pressures since December 2021 even though they remain at historically high levels (download data).  

While Global Supply Chain Pressures Are Decreasing, Pressure Still Remains High

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.
Note: Each index is scaled by its standard deviation.

To see what drove this recent easing in supply chain pressure, it may be useful to summarize how the GSCPI is built. As detailed in our original post, the GSCPI is based on two sets of data. Global transportation costs are measured by using data on sea shipping costs, for which we employ data from the Baltic Dry Index (BDI) and the Harpex index, as well as BLS airfreight cost indices for freight flights between Asia, Europe, and the United States. We also use three supply chain-related components— “delivery times,” “backlogs,” and “purchased stocks”—from the Purchasing Managers’ Index (PMI) surveys for manufacturing firms across seven interconnected economies: China, the euro area, Japan, South Korea, Taiwan, the United Kingdom, and the United States.

Before we combine these within the GSCPI by means of principal component analysis, we strip out demand effects from the underlying data series by projecting the PMI supply chain components on the “new orders” component from the corresponding PMI surveys and, in a similar vein, we do that for the global transportation cost measures that are projected onto the GDP-weighted “new orders” and “inputs purchased” components across the seven PMI surveys. This attempt at isolating supply side moves is very much reminiscent of similar approaches that have been proposed by the International Monetary Fund (see the latest World Economic Outlook, page 47) and the Bank of England (see the Monetary Policy Report, page 28), although we exploit more information  by allowing for cross-country linkages and by including various measures of transportation costs.

So, what has driven the easing of global supply chain pressures observed since December? In the next chart, we focus on the decline between January and February. Each column represents the contribution in standard deviation of each component of our index toward its overall change. Note that the lessening of supply chain pressures has been widespread among the various components, which is a welcome development in terms of reducing global supply chain disruptions.

Most GSCPI Components Decreased in February 2022

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.

The careful reader may have noticed some numerical differences between the current vintage of the GSCPI and those published earlier. Although we construct the GSCPI between 1997 and the present, we noted in our original post that some of our underlying data start later than 1997, whereas other series are published with a one-month lag. Consequently, we have data gaps both early in the sample as well as at the end. We take that into account when estimating the common component across the series by means of principal component analysis and in the process impute estimated values into these data gaps, as suggested by Stock and Watson (2002). Therefore, GSCPI levels of the most recent months can be revised as realized data become available and replace these imputed values. In addition, for some of the series, mainly the BLS airfreight cost indices, each new release comes with revisions to up to twelve months of previous data. The chart below compares the current release of the GSCPI with the previous three releases, and it shows that revisions can have an impact up to a year back in time. The chart furthermore shows that the current vintage of the GSCPI suggests that global supply chain pressures peaked in December, whereas the previous vintage had pressures reaching the highest levels in November. Both vintages suggests that 2022, at least up to February, has seen a decrease in global supply chain disruptions.

Revised and Realized Data Can Alter Previous Supply Chain Pressure Readings

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.
Note: Each index is scaled by its standard deviation.

Country-Specific Supply Pressure Indices

The data set for our GSCPI includes PMI data for seven countries: China, the euro area, Japan, Korea, Taiwan, the United Kingdom, and the United States. We can utilize these data in conjunction with our global transportation measures to approximate supply chain pressures in these economies. This entails taking the “delivery times,” “backlogs,” and “purchased stocks” components of a specific country’s PMI survey and adding the transportation cost measures, transformed into local currency terms. In relation to these transportation cost series, the shipping cost proxies are global and thus always considered for a country, whereas only the relevant regional airfreight cost measures are used—that is, the cost of airfreight between the U.S. and Asia for China, Japan, South Korea, and Taiwan, the cost of airfreight between the U.S. and Europe for the euro area and the U.K., and all airfreight costs measures for the U.S.

We therefore have six series per country, except for the United States, where we have seven. In a similar vein as in case of the GSCPI, we use regressions based on PMI demand proxies and their lags to cleanse each country’s data set as much as possible from demand effects. The cleansed series are then included in a principal component analysis at the country level, where for each country a common component is estimated while data gaps are simultaneously imputed with preliminary estimates.

In the two charts below, we plot our constructed indices for our seven economies. The first chart depicts our country-specific supply chain proxies for the euro area, Japan, the U.K., and the U.S. Supply chain pressures reach new highs in recent months for these economies but started to ease moving into 2022. In the cases of China, South Korea, and Taiwan, as shown in the second chart below, we also notice some easing in supply chain pressures heading into February after coming off fresh peaks on the back of COVID-related lockdowns in the region, with China lagging somewhat relative to South Korea and Taiwan.

Local Supply Chain Pressure Indices Remain Above Average Levels for Advanced Economies

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.
Note: Each index is scaled by its standard deviation.

Local Supply Chain Pressure Are Beginning to Decline in Emerging Markets

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.
Note: Each index is scaled by its standard deviation.

We note that while there are co-movements among the regional indices, idiosyncratic fluctuations in these measures do occur, reflecting country-specific factors. For example, we observe an increase in the Chinese index during the so-called trade war tensions with the U.S. Interestingly, the post-Brexit period does not seem to have resulted in a notable increase in the U.K. pressure index. A notable caveat with these country-specific indices is that they can be noisier and thus less precise in measuring supply chain pressures than the GSCPI, as they are based on a smaller set of inputs that limit the scope to “diversify away” noisy features in the underlying data and they ignore cross-country linkages that are at the heart of the supply chain connections among manufacturing firms.

Conclusions

In this post, we provide an update of the GSCPI and introduce proxies for country-specific supply chain pressures. Overall, we note that supply chain pressures have moderated relative to the peak reached in December 2021, but these pressures have remained at historically elevated levels through February. Going forward, there is the possibility that the current heightened geopolitical tensions might lead to more elevated supply chain pressures in the near future.

Chart data

Gianluca Benigno is an assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Julian di Giovanni is an assistant vice president in the Bank’s Research and Statistics Group.

Jan Groen is a research officer in the Bank’s Research and Statistics Group.

Adam Noble is a senior research analyst in the Bank’s Research and Statistics Group roup

How to cite this post:
Gianluca Benigno, Julian Di Giovanni, Jan Groen, and Adam Noble, “Global Supply Chain Pressure Index: March 2022 Update,” Federal Reserve Bank of New York Liberty Street Economics, March 3, 2022, https://libertystreeteconomics.newyorkfed.org/2022/03/global-supply-chain-pressure-index-march-2022-update.


Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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There will soon be one million seats on this popular Amtrak route

“More people are taking the train than ever before,” says Amtrak’s Executive Vice President.

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While the size of the United States makes it hard for it to compete with the inter-city train access available in places like Japan and many European countries, Amtrak trains are a very popular transportation option in certain pockets of the country — so much so that the country’s national railway company is expanding its Northeast Corridor by more than one million seats.

Related: This is what it's like to take a 19-hour train from New York to Chicago

Running from Boston all the way south to Washington, D.C., the route is one of the most popular as it passes through the most densely populated part of the country and serves as a commuter train for those who need to go between East Coast cities such as New York and Philadelphia for business.

Veronika Bondarenko captured this photo of New York’s Moynihan Train Hall. 

Veronika Bondarenko

Amtrak launches new routes, promises travelers ‘additional travel options’

Earlier this month, Amtrak announced that it was adding four additional Northeastern routes to its schedule — two more routes between New York’s Penn Station and Union Station in Washington, D.C. on the weekend, a new early-morning weekday route between New York and Philadelphia’s William H. Gray III 30th Street Station and a weekend route between Philadelphia and Boston’s South Station.

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According to Amtrak, these additions will increase Northeast Corridor’s service by 20% on the weekdays and 10% on the weekends for a total of one million additional seats when counted by how many will ride the corridor over the year.

“More people are taking the train than ever before and we’re proud to offer our customers additional travel options when they ride with us on the Northeast Regional,” Amtrak Executive Vice President and Chief Commercial Officer Eliot Hamlisch said in a statement on the new routes. “The Northeast Regional gets you where you want to go comfortably, conveniently and sustainably as you breeze past traffic on I-95 for a more enjoyable travel experience.”

Here are some of the other Amtrak changes you can expect to see

Amtrak also said that, in the 2023 financial year, the Northeast Corridor had nearly 9.2 million riders — 8% more than it had pre-pandemic and a 29% increase from 2022. The higher demand, particularly during both off-peak hours and the time when many business travelers use to get to work, is pushing Amtrak to invest into this corridor in particular.

To reach more customers, Amtrak has also made several changes to both its routes and pricing system. In the fall of 2023, it introduced a type of new “Night Owl Fare” — if traveling during very late or very early hours, one can go between cities like New York and Philadelphia or Philadelphia and Washington. D.C. for $5 to $15.

As travel on the same routes during peak hours can reach as much as $300, this was a deliberate move to reach those who have the flexibility of time and might have otherwise preferred more affordable methods of transportation such as the bus. After seeing strong uptake, Amtrak added this type of fare to more Boston routes.

The largest distances, such as the ones between Boston and New York or New York and Washington, are available at the lowest rate for $20.

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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This is the biggest money mistake you’re making during travel

A retail expert talks of some common money mistakes travelers make on their trips.

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Travel is expensive. Despite the explosion of travel demand in the two years since the world opened up from the pandemic, survey after survey shows that financial reasons are the biggest factor keeping some from taking their desired trips.

Airfare, accommodation as well as food and entertainment during the trip have all outpaced inflation over the last four years.

Related: This is why we're still spending an insane amount of money on travel

But while there are multiple tricks and “travel hacks” for finding cheaper plane tickets and accommodation, the biggest financial mistake that leads to blown travel budgets is much smaller and more insidious.

A traveler watches a plane takeoff at an airport gate.

Jeshoots on Unsplash

This is what you should (and shouldn’t) spend your money on while abroad

“When it comes to traveling, it's hard to resist buying items so you can have a piece of that memory at home,” Kristen Gall, a retail expert who heads the financial planning section at points-back platform Rakuten, told Travel + Leisure in an interview. “However, it's important to remember that you don't need every souvenir that catches your eye.”

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According to Gall, souvenirs not only have a tendency to add up in price but also weight which can in turn require one to pay for extra weight or even another suitcase at the airport — over the last two months, airlines like Delta  (DAL) , American Airlines  (AAL)  and JetBlue Airways  (JBLU)  have all followed each other in increasing baggage prices to in some cases as much as $60 for a first bag and $100 for a second one.

While such extras may not seem like a lot compared to the thousands one might have spent on the hotel and ticket, they all have what is sometimes known as a “coffee” or “takeout effect” in which small expenses can lead one to overspend by a large amount.

‘Save up for one special thing rather than a bunch of trinkets…’

“When traveling abroad, I recommend only purchasing items that you can't get back at home, or that are small enough to not impact your luggage weight,” Gall said. “If you’re set on bringing home a souvenir, save up for one special thing, rather than wasting your money on a bunch of trinkets you may not think twice about once you return home.”

Along with the immediate costs, there is also the risk of purchasing things that go to waste when returning home from an international vacation. Alcohol is subject to airlines’ liquid rules while certain types of foods, particularly meat and other animal products, can be confiscated by customs. 

While one incident of losing an expensive bottle of liquor or cheese brought back from a country like France will often make travelers forever careful, those who travel internationally less frequently will often be unaware of specific rules and be forced to part with something they spent money on at the airport.

“It's important to keep in mind that you're going to have to travel back with everything you purchased,” Gall continued. “[…] Be careful when buying food or wine, as it may not make it through customs. Foods like chocolate are typically fine, but items like meat and produce are likely prohibited to come back into the country.

Related: Veteran fund manager picks favorite stocks for 2024

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