Supply Chains No Longer Easing, But Far From Tight

The New York Fed's gauge for global supply chain pressures (GSCPI) rose to +0.11 in November from -0.39 in October - the latter being upwardly revised from -1.78 (on account of a change in exchange rate weighting methodology).

• The newly-revised figures cast a different light on the recent history of supply chain tightness.
• October's figures were at the time of release seen as the lowest in index history going back to 1997 - the new figure would have marked it as the highest reading since February 2022. The -1.57 of May 2023 now is joint-lowest in series history (with Nov 2008). And November 2023 is the first positive reading since January 2023. (The index is measured in standard deviations from the long-run average.)
• While the index has clearly bottomed and is turning higher, the index is now basically just in line with historic averages and well off the 4+ standard deviations above seen in late 2021.
• The easing of supply chains has been a key element to disinflationary progress in the second half of 2023, with US core goods prices peaking in May (PCE goods ex-food/energy) and Eurozone core goods HICP peaking in August and pulling back since.
• The deflationary impulse from easing supply chains is set to continue working its way through over the coming 6-12 months, though with things returning to "normal", the effect may not extend much past 2024.

Source: NY Fed, BLS, MNI