Just when we thought everything was gonna be all right – global vaccinations are on the rise along with forecasts for the global economy – a shortage of microchips threatens the automobile industry and a container ship gets stuck in the Suez Canal, threatening the global supply chain.
The shipping industry was already under pressure before the Suez blockage.
It’s always safe to assume that an unexpected event will occur, which is why the bond market has always priced risk into long-term securities. That disruption of the global supply chain, as well as the temporary shortage of microchips, will both play into an increase in inflation that we expect this year.
While we think that bump will not be large nor persistent, it is going to be part of the business landscape for the remainder of the year.
The shipping industry was already under pressure before the Suez blockage, with delays in processing because of pandemic requirements, leading to shortages of shipping containers.
But we assume those delays would diminish over time. In fact, the latest data shows a 25% year-over-year increase in import containers processed during February at American seaports, though the number of export containers processed declined again.
The increase in import container activity is a step in the right direction for the U.S. economy, signifying anticipation of increased consumer demand. Though the decrease in export container activity is a worrisome sign, this would not be the first time that the U.S. economy led the world out of recession.
All in all, the combined import and export container activity at U.S. seaports points to increased U.S. economic growth. Combined container activity at West Coast seaports for the three months ending in February grew by 11%, while estimates for all U.S. seaports suggest an increase in shipping activity of 7.6% per month, as shown in the figure below. The extent to which global trade might be affected by the Suez Canal blockage, however long it lasts, remains to be seen.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
