Supply chain crisis undermining recovery as stagflation fears grow – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the UK’s supply chain crisis and business.

The supply chain problems gripping the global economy are threatening to undermine the recovery, and raising fears of stagflation — that sickly mix of rising prices and slowing growth.

With energy prices surging, and companies still struggling to get their hands on parts and raw materials, policymakers fear that the rebound from the recovery is faltering.

Bank of England governor Andrew Bailey has warned the UK’s recovery to its pre-pandemic size will take longer than hoped, as supply chain problems drag on growth — and help to push the pound to its lowest level this year.

Sky News

The pound has come under pressure as fears over “stagflation” stalk the economy amid a supply chain crisis and surging energy prices

September 29, 2021

Bailey told a European Central Bank panel with other major central bank chiefs that Britain’s GDP probably won’t recover to pre-pandemic levels until early next year, a couple of months later than anticipated in August.

“I expect us to be back to the pre-pandemic level in the early part of next year, possibly a month or two later than we thought we would be at the start of August.”

Bailey added that:

“the big challenge now is how we can get through this period of uneven growth, supply-side bumps and come out of the other side with both a smoother recovery and balance of supply and demand.”


Supply chain crisis derailing recovery, warns Andrew Bailey

September 30, 2021

Other central bankers are also worry that supply chain shortages will shunt the recovery, and drive up consumer prices.

They are watching closely for signs that higher-than-expected inflation leads to wage increases, creating a cycle that could increase pressure for central banks to hike borrowing costs — although they do argue that these disruptions will be temporary.

Jay Powell, chair of the US Federal Reserve, said it was “frustrating” that supply-chain bottlenecks were holding back the recovery of the world’s largest economy.

He told the EBC’s panel:

“The combination of strong demand for goods and the bottlenecks has meant that inflation is running well above target.

We expect that it will continue to do so in the coming months before moderating as bottlenecks ease.”

ECB president Christine Lagarde also sounded concerned, saying supply bottlenecks “seem to be accelerating in some areas”:

“How long these bottlenecks will take to fade out is a question we are monitoring very closely and this is on our radar screen.”

Financial Times

Fed’s Powell warns inflationary supply chain snags may persist

September 29, 2021

Surging energy prices are a particular headache — driving up costs for businesses and hammering consumers with higher energy bills, and causing three more UK energy firms to collapse yesterday.

Wholesale prices for gas and coal are both hitting records, as the Northern Hemisphere heads towards what could be a very difficult winter:

Javier Blas

GAS MARKET: European natural gas closes at a fresh all-time high after rising >10% today (both for UK NBP and Dutch TTF benchmarks). At the close, European gas was at the equivalent of ~$29 per mBtu, or close to $170 per barrel of oil equivalent. Yes, you read that correctly.

September 29, 2021

Javier Blas

Asian benchmark coal (Newcastle) has been changing hands on the spot market above $200 per tonne for the last couple of days, above the weekly all-time high set in July 2008. Incredible prices, with runaway Chinese demand clashing against ESG-crunched supply | #CommodityInflation

September 29, 2021

Michael Hewson of CMC Markets says:

Fears over stagflation do appear to be rising, after all, how could they not be when you see the sorts of increases being seen in energy prices, a trend that will eat into people’s disposable income, thus reducing their capacity to spend on other incidentals.

These supply chain problems have been seen acutely in the UK this week, during the fuel crisis.

With petrol stations still struggling, the government yesterday started deploying its reserve tanker fleet, driven by civilians, to boost fuel deliveries.

And soldiers are expected to be deployed to drive tankers in in the next few days, to help clear the queues and shortages that began nearly a week ago.

The government insists the situation is improving, with business secretary Kwasi Kwarteng saying.

“The last few days have been difficult, we’ve seen large queues. But I think the situation is stabilising, we’re getting petrol into the forecourts. I think we’re going to see our way through this.”

But the wider supply chain crunch remains intense, with shortages in shops and on the forecourt

Asked if the government was certain the problems would be solved for the run-up to Christmas, Kwarteng said:

“I’m not guaranteeing anything. All I’m saying is that, I think the situation is stabilising.”

The agenda

  • 7am BST: Nationwide house price index for September
  • 9.30am BST: ONS’s weekly survey of real-time indicators of economic activity and social change
  • 10am BST: Eurozone unemployment report for August
  • 1pm BST: German inflation report for September
  • 1.30pm BST: US weekly jobless figures


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