The NY Fed's supply chain index fell from a revised 1.81 to 1.25 in June, fueling hopes that goods inflation will moderate and allow the Fed to cut rates.
Alpha Score of 64 reflects moderate overall profile with strong momentum, strong value, weak quality, moderate sentiment.
Global supply chain pressures eased in June, with the New York Fed's Global Supply Chain Pressure Index dropping to 1.25 from an upwardly revised 1.81 in May, the bank said Monday.
The April reading was the highest since 2022. The bank attributed that surge to the U.S.-Iran conflict, which disrupted traffic through the Strait of Hormuz and pushed fuel prices higher.
New York Fed President John Williams warned late last month that supply chain problems still pose risks to the inflation outlook. Inflation is "unquestionably elevated and well above" the 2% target, he said in a speech. Williams also expects pressure to moderate. "If the strait disruptions are resolved," he said, "energy and related goods prices should stabilize, then start to come down later this year."
The decline in the index has given economists and Fed officials hope that inflationary pressures will ease, Reuters reported.
The cost of supply chain disruptions goes beyond the immediate price spikes. Data from global consulting firm J.S. Held, cited in the report, shows disruptions cost businesses about $184 billion per year. Much of that cost comes from the lag between identifying a problem and acting on it, not from the disruption itself. The Hackett Group estimated that $1.7 trillion in global working capital is tied up in excess inventory, held as a buffer because companies lack the real-time data to set inventory levels with confidence.
Third-party logistics company C.H. Robinson debuted an AI system last month that addresses that lag, according to a PYMNTS report. The system assesses an entire supply chain in 25 to 30 minutes and identifies improvements before performance breaks down. Traditional methods take four weeks to produce the same analysis.
McKinsey found that manufacturers who increased supply chain visibility saw a 15% to 20% improvement in inventory turns and lowered expedited-service costs by 30% to 50%. Those gains feed into working capital release and margin protection.
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