Reports from Moody’s, Federal Reserve describe stressors to supply chain

(CNN/AP) — From port congestion and price spikes to widespread shortages, stress in U.S. supply chains is intensifying and could slow the economy in the coming months, Moody’s Analytics warns.

“Supply-chain headaches show no sign of subsiding just yet,” Moody’s economists led by Matt Colyar wrote in a Tuesday report.

About 200,000 shipping containers, holding everything from toys and sneakers to critical parts for factories, remain stuck on ships floating off the coast of Los Angeles. A record 100 cargo vessels, from barges to container ships, are anchored outside the Ports of Los Angeles and Long Beach.

Transportation Secretary Pete Buttigieg acknowledged Wednesday that despite the Biden administration’s efforts to address bottlenecks, it will take time to get supply chains back to normal.

“There are going to be disruptions and shocks to the system as long as the pandemic continues,” Buttigieg told CNN’s Jim Sciutto.

Fed survey finds economy facing supply chain, other drags

(AP) — The Federal Reserve reports that the economy faced a number of headwinds at the start of this month, ranging from supply chain disruptions and labor shortages to uncertainty about the delta variant of COVID.

In its latest survey of business conditions around the nation, the Fed said Wednesday that a majority of its 12 regions viewed consumer spending, the main driving force for the economy, as remaining positive despite the various speed bumps.

The report noted wide differences in performance, however, with auto sales suffering because of constrained inventories due to supply-side problems while manufacturing was growing either moderately or robustly depending on which Fed district was reporting.

“Outlook for near-term economic activity remained positive, overall, but some districts noted increased uncertainty and more cautious optimism than in previous months,” the Fed said in the report on business conditions nationwide, known as the beige book.

The report, based on surveys of business contacts by the Fed’s 12 regional banks, will form the basis for discussion when central bank officials next meet on Nov. 2-3.

The Fed is widely expected to announce at that meeting that it will begin to reduce, or taper, its $120 billion in monthly bond purchases starting either in November or December.

Those purchases have been designed to give the economy an extra boost by holding down long-term interest rates.

A move to trim the purchases is expected to be followed in the second half of next year with the first rate hikes. The Fed’s benchmark interest rate has been an at ultra-low zero to 0.25% since the COVID pandemic struck with force in the spring of 2020.

‘There are no bright spots’

(CNN) — To measure the logistical strains impacting the economy, Moody’s recently created a U.S. supply chain stress index that is made up of various metrics for production, inventory and transportation. That index climbed to 135.9 in August, compared with pre-pandemic levels of about 100.

Moody’s said early signs point to another increase in the supply chain stress index for September, driven by the further price increases.

“Stress in U.S. supply chains isn’t abating,” the economists wrote.

In an interview, Colyar said none of the underlying metrics are showing improvement at this point.

“Everything is moving in the wrong direction,” he said. “There are no bright spots,”

Supply chain stress is slowing the economy

(CNN) — The logistics nightmare is posing a real obstacle for the economic recovery from COVID-19.

Hurt by a shortage of materials and workers, U.S. industrial production unexpectedly fell in September, according to the Federal Reserve. Industrial production measures everything from manufacturing and mining to electric and gas utilities.

Moody’s warned that “sand in the gears” of the global economy could cause the U.S. economy to grow more slowly than previously forecast.

Indeed, there is a risk that the U.S. economy barely grew at all in the third quarter, which ended in September.

The Atlanta Federal Reserve’s GDPNow model was downgraded on Tuesday to project GDP grew at an annualized pace of just 0.6% in the third quarter.

That’s down sharply from a call for GDP growth of 1.2% as recently as last week, and nearly 4% last month.

Wall Street economists, however, are much more optimistic and are calling for GDP growth of almost 4% — although that’s down from forecasts over the summer.

At the same time, Moody’s warned the supply chain stress threatens to keep inflation elevated. Consumer prices rose 5.4% in September, tied for the fastest 12-month increase since 2008. Price spikes are more severe on everything from used cars and bacon to children’s sneakers.

Procter & Gamble, the nation’s largest consumer goods maker, said Tuesday it will raise prices on grooming, beauty and oral care products. According to one distributor, P&G sent an email, obtained by CNN Business, that indicates it would raise prices on some Olay moisturizers by up to 20%, select Crest and Oral-B mouthwashes by up to 32% and battery powered toothbrushes by as much as 20%.

CNN’s Nathaniel Meyersohn contributed to this report