The New York Fed’s index of supply chain disruptions: An update

The surge in inflation over the past 12 months is often attributed to supply chain disruptions arising from the Covid-19 pandemic. With workers staying home because of the risk of contracting Covid or because of the need to take care of children at home from school or sick relatives, firms have struggled to maintain employment and output. With spending shifting from services to goods, global transport capacity has been overwhelmed. The net effect has been strong demand colliding with a weakened supply capacity, leading to upward pressures on goods prices.

To gain a better understanding of this effect, the New York Fed published in January a study and data on supply chain disruptions (A New Barometer of Global Supply Chain Pressures by Gianluca Benigno, Julian di Giovanni, Jan J. J. Groen, and Adam I. Noble).¹ On 03 March it published new data and an update by the same authors (Global Supply Chain Pressure Index: March 2022 Update).²

The new data for the global measure suggests that the supply chain disruptions have on balance become less severe in recent months. Thus, the global index fell from 4.50 in December 2021, to 3.82 in January and 3.31 in February.³ While this is an improvement, it remains the case that supply constraints are much greater than normal and that much more progress must be made before they have been fully resolved.