Supply chain problems continued to drive inflation up in December

Persistent challenges in getting goods from factories to customers continue to drive up the prices of cars, computer chips, furniture and other goods, pushing consumer prices up in December at the fastest pace since 1982.

The consumer price index climbed 7 percent in the year through December, and 5.5 percent after the removal of volatile prices such as food and fuel, the data showed. published on Wednesday.

The price of used cars and trucks jumped 37.3 percent in December, while food rose 6.3 percent and clothing rose 5.8 percent. Increases in the cost of energy and rents have also resulted in price increases.

The Omicron variant infects workers in factories, ports, trucking companies and warehouses and leads to further shortages of certain products and parts used to manufacture goods. Strong demand from US consumers also continues to drive up shipping prices and increases in fuel prices for a variety of products.

China is also carrying out sweeping shutdowns to prevent the variant from spreading ahead of the Beijing Olympics next month, raising fears of further disruption in the coming weeks for supply chains crossing the country.

Despite some predictions that supply chain problems will dissipate, many companies appear to have seen little improvement in supply chain problems which continue to increase costs and spill over into the prices of retailers. higher thumbnails.

“Much of the tumultuous nature of the supply chain that has occurred over the past year continues, and sadly there isn’t much relief in sight,” said Douglas Kent, Executive Vice President of Strategy and Alliances at the Association for Supply Chain Management. .

The price of shipping a 40-foot container from Asia to the west coast of the United States hit $ 14,572 this week, down slightly from a peak of over $ 20,000 in September, but still close ten times more than two years ago, according to data from the Freightos group. .

The group’s data also showed that delivery times for ocean shipments from China to the United States hit a record 80 days in December, up 85% from 2019.

Judah Levine, head of research for Freightos Group, said delays were always a reality for U.S. importers, due to ever-increasing demand and continued congestion at the ports of Los Angeles and Long Beach, the gate entry of many goods from Asia. Recent flight cancellations due to Omicron’s push would further restrict cargo capacity and help keep fares high, he said.

Speaking at the Port of Long Beach on Tuesday, Transportation Secretary Pete Buttigieg said record volumes of cargo moving through U.S. ports were straining systems that had experienced decades of underinvestment, causing delays and delays. price increases.

But he praised the ports for making changes like extending their hours of operation and prioritizing shipments of medical supplies, and said more investments to increase capacity were underway.

“There is no doubt that when you have limited access to shipping, you are going to see upward pressure on prices, and that will be part of our inflation challenge,” Buttigieg said.

With price increases weighing on the president’s approval ratings, the Biden administration has called meetings with executives from logistics companies, retailers, ports and trucking companies to try to overcome those hurdles.

He pledged $ 17 billion in port investments under the infrastructure law. But since most links in the supply chain are in the private sector, the administration has found few short-term solutions to the supply crisis.

While much of the United States appears determined to resume operations as usual, at least as soon as Omicron’s current surge subsides, further disruption in other parts of the world could prolong the hardship for them. businesses and consumers.

China, home to many factories around the world, has confined millions of its residents in recent weeks in an attempt to keep the Omicron variant at bay, including in the port cities of Ningbo, Tianjin and Shenzhen.

The country’s zero tolerance strategy for Covid is causing the widest lockdowns since the start of the pandemic, slowing traffic to some of the world’s busiest ports and raising concerns of more disruption this year. China remains the largest supplier of goods to the United States.

“If they stick to their zero case doctrine, a global supply chain disaster is on the horizon,” said Tinglong Dai, professor of operations management at the University’s Carey Business School. Johns Hopkins.

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