While still affecting consumers and businesses, supply chain bottlenecks have loosened compared to six months ago. Inflationary pressures arising from them have also become less severe. Each supply chain improvement is gradually showing up in metrics compiled by Bloomberg Economics or the US Federal Reserve (Fed) branch of New York. However, the gradual end to the supply crunch during the pandemic may be giving way to another potential problem: a slump in consumer demand that reverses economic growth and creates a pile of cash. excess inventory. In an early July report, Citigroup economists commented: “Pressure in the global commodities sector, which has been a major driver of inflation, may have finally eased.†“The bad news is that this seems to be happening due to slowing consumer demand, especially in consumer discretionary goods. That also signals an increased risk of recession," Citigroup emphasized. Citigroup is quite cautious, so it does not want to declare that the bottlenecks in the supply chain "have been completely resolved." The US banking giant said there is reason to doubt whether they can be removed soon. Strikes at seaports, disruptions to factory operations in China, the Russia-Ukraine war and the pressure to ship goods during the year-end holidays could disrupt the global logistics network once again. Every knot is untied According to data from Oxford Economics, the latest figures on supply disruptions in the US have fallen for three consecutive months, as shown in the chart below: The chain of beautiful women who have been born in the past year is now going to have a new life Overall, economists agree that U.S. household demand for goods will be a key factor to watch in the coming months, but they disagree on whether demand will strengthen or not. started going down. One indicator suggests demand may return to normal levels as people go out to dinner, see concerts and travel more than during the lockdown. To accurately determine future consumption trends, Flexport has built a post-COVID indicator to track how Americans divide their wages. The results show that "consumer preferences changed slightly in May, they were less eager to buy goods". “Our index is forecast to stay close to current levels throughout the third quarter of this year,†Flexport said. That means consumers will reduce their purchases of goods to switch to services, but overall spending on goods is still slightly higher than in the summer of 2020 and before the pandemic. The body that controls some of the levers of economic activity is the Fed. According to the latest regional survey by the US central bank, businesses are still dealing with many supply problems but the severity has decreased. Bloomberg looked at the number of times the word "shortage" appears in the Fed's Beige Book survey, which can be a shortage of labor, raw materials, or other critical manufacturing factors. While still more than twice the pre-COVID-19 level, the number of occurrences of the word "shortage" has dropped to about a third from its August 2021 peak, Bloomberg reported. The chain of beautiful women who have been born in the past year is now going to have a new life Another indicator shows that supply has become less tight. Sea freight rates have been steadily falling from record highs. And it is worth noting that freight rates cool down during the peak season for global freight. Container prices are still well above pre-COVID-19 levels but on an increasingly downward trajectory, seemingly finding a bottom amid uncertainty over whether consumer spending will increase or decrease in the near term. Much of the supply chain's recovery depends on China's trade and production of goods. Not to mention, whether Beijing can keep seaports running smoothly when it continues to maintain its Zero COVID policy also plays an important role. China appears to be holding up after it released new data, showing that June was the country's second-best export month in at least three decades. The chain of beautiful women who have been born in the past year is now going to have a new life Bloomberg Economics economist Eric Zhu published a data sheet. The results showed that manufacturing activity in China recovered and delivery times shortened after Shanghai eased COVID restrictions. Bad news still However, not every link of the supply chain is okay, especially in Europe, which is facing problems with freight due to its proximity to the conflict zone in Ukraine. Sanctions on goods originating in or destined for Russia are further complicating European trade flows, especially from Asia. Not to mention, workforce disruptions like those at major German ports will make the situation even more intense. According to data from the Kiel Institute for World Economics, congestion is emerging at ports in Northern Europe and escalating further along the East Coast of the United States. Ships are queuing for days or even weeks from Georgia to New York waiting to unload. Another indicator that the supply tension issue is not likely to ease quickly. This weekend, data from the US Department of Commerce showed that retail sales in June were stronger than economists had forecast. "It shows that the US economy still has room to grow through the rest of 2022, as consumers look to cope with rising inflation," said Bloomberg Economics economists Yelena Shulyatyeva and Andrew Husby. In other words, Americans will likely continue to buy and supply chain problems will become more and more deadlocked.