Global supply chains are being battered by fresh covid surges – Bloomberg

With Delta covid variant pouring cold water on the face of the economic recovery hopes, Bloomberg came out with an analytical piece highlighting further hardships for the global supplies due to the virus.

Key quotes

After weathering earlier pandemic waves better than other regions, the fast-spreading delta variant has thrown into turmoil factories and ports in countries that were once among the most successful in containing the virus.

The snarls in Asia -- where the United Nations estimates around 42% of global exports are sourced -- risk twisting their way through global supply chains just as shipments would usually ramp up for the Christmas holiday shopping season.

In China, the world’s third-busiest container port was partly shut recently, while in Southeast Asia -- among the worst-hit regions -- factory executives have stalled production of electronics, garments and scores of other products.

Meanwhile, the supply choke will fuel concerns that rising inflation for Chinese producers or U.S. consumers will prove more than transitory, testing expectations among policymakers for a near-term cooling in prices.

Among reasons for recently downgrading their global growth forecasts, economists at JPMorgan Chase & Co. highlighted the risk from Asian countries with low vaccination rates.

The virus surge comes as exporters continue to complain of sea freight costs that can be multiples of what they were before the pandemic, mostly due to a shortage of shipping containers.

The Drewry World Container Index reached $9,421.48 per 40-foot container as of Aug. 12 -- about 350% higher than the same time a year ago.

FX implications

The news/analytics weigh on the market sentiment and highlight today’s China data dump for the near-term direction.

Read: AUD/USD: Recovery remains capped below 0.7400, China data dump eyed