A new measure from the Federal Reserve Bank of New York (Benigno, Di Giovanni, Grohn and Noble):
From the post:
[W]e proposes a new measurement standard, the Global Supply Chain Stress Index (GSCPI), which integrates many commonly used indicators to more comprehensively summarize the potential disruptions affecting the global supply chain.
The index itself:
In order to estimate our GSCPI indicator, we therefore have a data set of 27 variables: each economy in our sample (eurozone, China, Japan, South Korea, Taiwan, the United Kingdom, and the United States), two global shipping rates, and a summary Four price indices for air freight costs between the United States, Asia and Europe. As mentioned earlier, all of these variables are adjusted to the greatest extent possible for demand effects. The data set consists of monthly time series of uneven length: the supply chain variables of advanced economies all started in 1997, Japan started in 2001, other Asian economies in 2004, the Harpex index started in 2001, and the BDI is a retrospective. In 1985, the BLS air freight price index backtracked back to 2005 on a monthly basis, and backtracked every quarter from 2005 to 1997. Our goal is to estimate a common or “global” component from these time series. In order to be able to do this while dealing with the data gap, we follow Stock and Watson (2002) and extract the common component from 1997 to 2021 through principal component analysis, and use this estimated common component to fill the data gap.
The author concludes that the current pressure is abnormally high, but it seems to have eased in the last observation.
For a graphical description of why supply chain pressure is important, please refer to this postal, Figure 3-Cost drives shocks.
image 3: Cost drives the shock.
