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  • Writer's pictureRobert Baharian

Supply Chains Are Crashing

Last week I wrote a piece on inflation, US mid-terms and stocks. I outlined the fall of inflation since its peak of June 2022. We also looked at how quickly inflation has risen since 2021, and the expectations for it based on historical events.

In this week's chart, I want to share with you the Kansas City Fed 6 Month Manufacturing Survey Supplier Delivery Time. It basically shows us that future supply chain stress is non-exisent as it crashes to its lowest level on record.

We're also seeing global freight costs declining. Although still double their pre COVID levels, they have fallen 73% from their September 2021 peak. Lumber is back down to it's pre COVID levles having fallen 75% from it's May 2021 peak. Global food prices remain elevated, however they are down 15% from their March 2022 peak. Iron ore is back down to it's pre COVD levels, having crashed 57% from it's May 2021 peak. I can go on, but you get the picture.

This has prompted a number of research/investment houses to revise their outlook for inflation. Goldman Sachs in particular have reduced their outlook for inflation to 2.9% by the end of 2023. I'm sure this forecast will be wrong, but what I believe it demonstrates is a clear shift in momentum and outlook for inflation.

With one further central bank meeting this year, will we see one final raise by global central banks before they take the foot off the gas in 2023? Markets move fast, markets move unpredictably. Making investment decisions based on yesterday is like taking out car insurance after you've had a car accident. Look through the windshield. Look ahead. Into the horizon. Plan ahead. Take a longer-term view. The less you get caught up in what is going on right now, the clearer your mind will be to make thoughtfull decisions for your future.


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