‘Tiny Green Shoots’ of Relief Seen on Shortage Problems

New data may signal a slight improvement in supply logjams causing inflation

Male and female steelworkers using digital tablet during steel pour in steelworks
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Monty Rakusen/Getty Images

Even as winter nears, there are new signs of at least a slight thaw in the frozen supply lines that have pushed prices up and kept some items out of stock.

Key Takeaways

  • The supply chain problems that have contributed to inflation and dogged the economic recovery are showing some very slight signs of improvement.
  • The data was gathered before the new omicron variant of COVID-19 emerged.
  • Businesses say backlogs are growing at a slower pace, and there are indications it’s easier to get certain critical materials.

A November survey of supply and purchasing executives around the country showed orders went up, production rose, prices grew more slowly, backlogs expanded at a slightly slower pace, and hiring picked up a bit, the Institute for Supply Management said Wednesday. Other bits of new data are also encouraging: Fewer cargo ships are waiting to unload along the California coast and supplies like steel are easier to get.

“We are not out of the woods yet by any means,” economists at Wells Fargo said in a commentary about the ISM report, but it was “the best report card for the manufacturing sector that we have seen in months—a welcome indication that the choke points in the supply chain are clearing, if only incrementally.”

The ISM’s manufacturing indexes, based on data gathered before the new omicron variant of COVID-19 emerged, showed most areas improving at least a little, and prices, new orders, and production measures, which had been getting worse, changing direction for the better. The movements were small, but economists were encouraged that they were headed the right way.

Fewer difficulties in producing and transporting food and products would be a welcome development as soaring inflation grips the country this holiday season. Supply can’t keep up with demand as shortages of materials and workers and lack of truck drivers and capacity at cargo terminals mean consumers can’t get enough of the things they need and want. The clogs resulted not only from pandemic disruptions, but from unprecedented demand for stuff.

Besides the ISM report, the number of container ships waiting outside the harbors at Los Angeles and Long Beach, where 40% of U.S. imports arrive, has fallen sharply in recent days

Faint signs of optimism also were detectable in the Federal Reserve’s Beige Book, a survey released Wednesday of experts and business leaders covering a period up to Nov. 19. Captains of industry said they’ve had an easier time getting some critical materials such as steel and computer chips, according to the survey.

“Finally, some tiny green shoots … some sign that there is relief coming, that the pipelines are less clogged,” Jennifer Lee, senior economist at BMO, wrote in a commentary about the Beige Book. “It will take time to clear but at least we are seeing some signs that it is happening.”

President Joe Biden painted an optimistic picture of supply chain issues in a speech Wednesday, saying major retailers like Walmart had assured him their shelves are well-stocked for the holiday shopping season.

“If you’ve watched the news recently, you might think the shelves in all our stores are empty across the country, that parents won’t be able to get presents for their children on holidays — this holiday season,” he said. “But here’s the deal: For the vast majority of the country, that’s not what’s happening. Because of the actions the administration has taken in partnership with business and labor, retailers and grocery stores, freight movers and railroads, those shelves are going to be stocked.”

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