Global supply chain disruptions reached their most severe level in nearly two years during April, according to new data released Wednesday by the Federal Reserve Bank of New York.
The bank’s Global Supply Chain Pressures index jumped dramatically to 1.82 in April, up from 0.68 in March. This represents the highest reading since July 2022, when the index reached 1.86. The month-to-month increase was the steepest recorded since March 2020, when the coronavirus pandemic first disrupted the world economy.
While the New York Fed didn’t elaborate on specific causes behind the surge, the escalation comes amid ongoing Middle East conflicts that have severely hampered global shipping routes. The war has particularly affected trade through the Strait of Hormuz, bringing commerce through this critical waterway nearly to a halt and pushing energy costs higher worldwide.
The trade disruptions continue without resolution, keeping shipping lanes blocked and commerce restricted.
New York Fed President John Williams addressed the situation Monday, describing “notable” supply chain pressures that have started to intensify. Recent information, he noted, “echoes the severe shortages and supply disruptions that the world economy experienced in 2021 as it emerged from the pandemic.”
Those earlier supply chain problems, combined with pandemic-related government policies, ultimately triggered the worst inflation surge in decades. Even today, with the health crisis behind us, inflation remains above the Federal Reserve’s 2% goal.
Current inflation data already reflects mounting price pressures from increased import taxes and elevated energy costs related to the conflict. Economic experts warn that inflation could worsen significantly unless war-related disruptions end soon.
This situation creates a challenging position for Federal Reserve policymakers. Officials have stepped back from earlier expectations of interest rate cuts this year and are increasingly anticipating stable rates for the near term, with potential rate increases if high inflation continues.
Economists at Evercore ISI project that core inflation, measured by the personal consumption expenditures index, will likely approach 3% in the fourth quarter. They estimate that “roughly 50 basis points of that comes from tariffs, oil and supply chain disruptions, plus another 20 basis points from AI cost spillovers.”
