New Index of Global Supply Disruptions Signals Improvement Ahead

January 5, 2022

A new method of measuring global supply chain disruptions developed by the Federal Reserve Bank of New York shows that disruptive pressures are at the highest level since at least 1997. Researchers do, however, believe the new index may have peaked and could begin to moderate going forward.

The Global Supply Chain Pressure Index was developed by researchers at the New York Fed and is based on 27 different variables that track a variety of economic factors like the cost of cross-border transportation and country-level manufacturing data from across the world.

The index is then normalized such that a zero reading indicates that the index is at its average level, and positive or negative values indicate how many standard deviations the gauge is above or below the average. The researchers argue that the index shows that spikes attributed to economic events like the 2008 crisis “pale in comparison to what has been observed since the Covid-19 pandemic began.

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