Three factors are expected to help normalize trade in the second half of 2022: reduced consumer demand, healthy inventory levels and increased shipping capacity.
According to a new report by the trade credit insurer Euler Hermes, the disruptions in the global supply chain will continue in 2022 due to the new cases of covid-19, China’s policy of zero tolerance to the virus, and the instability that celebration for the new Lunar Year is expected to cause.
In particular, measures to limit Covid-19 may affect construction and shipping activities.
In addition, the report makes it clear that production shortages are responsible for 75% of the current shrinking volume of world trade, while logistics is the cause for the remaining 25%.
However, three factors can alleviate the situation and lead to the normalizing of the supply chain crisis.
First, consumer demand has peaked. According to the report, while the savings have not been depleted, households are gradually turning to more sustainable consumption. Therefore, the consumer public is, once again, shifting towards the services market. Thus, demand is subject to a “self-regulating normalization”, allowing supply chains to recover.
Second, inventories return to pre-coronavirus levels. According to the report, inventory levels in most sectors has exceeded the pre-crisis average. At the same time, there is an increase in CAPEX in the US, which may help capacity to meet demand. Similarly, in Europe, there is an increase in investment capacity in 2022. The increase will be crucial for the normalization of the supply-demand relationship.
Third, shipping capacity is increased. According to the report, orders for new container ships increased. Thus, shipping congestion is to reduce in the second half of 2022 as capacity increases. Finally, about $ 17 billion will be spent on infrastructure and waterways in the US, which will help decongest.
Finally, the report foresees the development of world trade. The data show a possible increase in world trade by 5.4% in 2022 and 4% in 2023, after a growth of 8.3% in 2021.
Source: www.cnbc.com
