Supply chain pressures remain well above pre-pandemic levels, but there are signs that global trade relations may begin to normalize this year – even as many countries face rising cases of the Omicron coronavirus variant and persistently high inflation.

An indicator of global supply chain constraints compiled by the Federal Reserve Bank of New York shows that stress peaked in October 2021. But the index — based on 27 variables including global freight and air freight costs — fell slightly in November and December.

Some analysts believe that tightening in some areas will continue to ease in the coming months.

Simon Edelsten, manager of Artemis Global Select Fund and Mid Wynd Investment Trust, said: “Over the next year, some supply chains appear to settle on their own, while others may be more persistent.”

The rapid reopening of the global economy “taken some by surprise last year,” Edelstein said.But he added that some industries, such as the auto industry – which have suffered from semiconductor shortages – “seem to be improving”, noting that Toyota and Tesla’s most recent sales figures.

companies around the world Being hit The introduction of border restrictions by many governments coincides with strong consumer demand due to pandemic-related pressures such as factory closures and bottlenecks. Disruptions to the logistics network lead to increased transportation costs and delayed deliveries.

“Last year was a perfect storm of supply chains. Not only did we let Covid disrupt production, but fiscal stimulus boosted demand, Suez Canal closed It caused months of chaos,” said Guy Foster, chief strategist at wealth management firm Brewin Dolphin.

Supply chains are likely to become more resilient this year as inflation hits consumers’ purchasing power and more companies adjust to coronavirus-safe production protocols. In addition, Foster said a glut of orders over the year-end holiday could replenish inventory when older deliveries are completed.

Tight supply chains have kept inflation high.U.S. consumer prices rose year-over-year, new data on Wednesday showed 7% in December, their fastest pace in nearly 40 years. Separate data on Thursday showed U.S. wholesale prices rose at an annual rate of 9.7% last month, although that was slightly below economists’ forecasts.

even as Macroeconomists are generally optimistic For roughly the next year, most indicators of supply chain stress remain well above pre-coronavirus levels. Container freight rates peaked in October but are still more than five times their January 2020 levels, according to data provider Harpex.

Richard Flax, chief investment officer at digital wealth manager Moneyfarm, expects a supply chain recovery to happen “slowly” over 12 to 18 months. Improvements related to investments to improve security of supply and plant efficiency will take time, he added.

Timothy Fiore, president of the Institute for Supply Management, noted “signs of improvement” in labor resources and supplier delivery performance. But he added that customer inventory levels remained very low, while backlogs “remained at very high levels”.

“The fly in the ointment is China,” said Foster, who sees “a major risk” to the supply chain this year. The new wave of coronavirus infections and China’s “zero Covid-19” policy could lead to port closures, which would further disrupt shipping, he said.