Is Omicron causing supply chain disruptions?
In the United States, an omicron outbreak is causing supply chain difficulties. Even though the market previously suffered a shutdown as a result of the pandemic slowly it has been recovering. The Omicron variant, on the other hand, could be the source of major supply chain delays.
According to Bloomberg’s monthly survey, growth in the gross domestic product for the January-March quarter is expected to fall to 3% from 3.9 %. Inflation forecasts, on the other hand, were raised for each quarter through 2023, citing ongoing supply chain issues that could be aggravated by the omicron outbreak.
“It is not a domestic issue, it is a global issue and every government is reacting slightly differently because they are under enormous media pressure to do so but I think if they were honest and would accept the fact that if you stop one leak, another one will occur. So, there is no straightforward solution to what is happening. The focus should be more on the inflationary impact of what’s going on; because I think that is probably much more problematic in the medium to long term than the supply chain disruptions that we are going to experience by 2022 or by 2023 when things start to re-balance itself.” said Mr. Lewis Black, (President and CEO of Almonty Industries) adding that there is no way to avoid the issue and that the market must achieve a balance and inflation is a major concern that should be addressed.
According to Biden officials, even though supply networks are severely pressured, there are still rays of hope. The number of container ships stopped for nine days or more has reduced by 41% since November 1, falling to 75,000, according to a White House blog post. On-the-shelf accessibility continues at 90%, according to market research firm IRI, down just one percentage point since February 2020.
When asked about global manufacturing and supply chain disruptions, he agreed to the statement that, despite supply chain disruptions, they have managed to stay afloat so far.
He said, “Yes, I think demand has been reversed. Although getting the goods to the markets has been problematic and one may, naturally, have worries about the cashflows ultimately with so much money being pumped into the economies by various governments, that cashflow drama or concern has certainly been negated to a certain extent. They know when the goods get to the market there is an appetite for them. I don’t think the manufacturers are the reason for the rising costs to the end consumer.”
Meanwhile, various reasons, including high inflation and high gas prices, as well as the supply chain, have led to a severe drop in consumer confidence.
TS Lombard is a well-known independent economic and investment strategy research firm with a global reputation. According to TS Lombard, if “omicron throws a wrench in the works on supply chain recovery, it could pose a threat to regional exports recovery.”
The emergence of omicron has served as a strong reminder of the pandemic’s uncertainty. New variants that appear in 2022 may exacerbate some of the current challenges. In this scenario, China’s continued zero-COVID policy, combined with its strong border controls, may pose a challenge.
Mr. Lewis Black expressed his dissatisfaction with the existing situation by saying, “it’s up to the governments how the supply chain ends up being the victim or not. Omicron itself is going to be the problem and the problem is going to be if government start acting unilaterally like they did the last time when one shuts down, like today (16th December 2021) France announced that they are banning anyone from Britain coming into France because Britain’s has 78,000 infections yesterday against France is 65,000. I mean, it is such absurdity! We can all go back to politically fighting with each other, between parties later. Right now, we just have to be able to stand each other long enough to work together to bring us out of this successfully. Such unilateral actions can cause absolute chaos for the supply chain.”
Believe in Vaccines
“I believe very much in vaccines,” said Mr. Black.
He also said, “we have to accept at some point that all that we have now is the vaccination. They have got some great pills coming and all these antivirals, that is terrific! But now we have to crack on. Just last year the global economy experienced a big wobble. The economy, the supply chain (in particular) is not strong enough to take a second whack within 24 months, which would be harmful to its growth trajectory.”
Inflation
The Omicron variant of COVID-19, according to US Treasury Secretary Janet Yellen, might hinder global economic development by worsening supply chain issues and decreasing demand. The new strain may aggravate supply chain issues and increase inflation, but it may also dampen demand and halt growth, relieving some inflationary pressures.
Inflation typically occurs whenever a central bank (such as the Federal Reserve Bank) prints quite so much money to pay for government debt or simply to boost financial activities.
By agreeing with Janet Yellen’s statement, Mr. Black remarked, “I think Janet Yellen is correct if another supply train crisis occurs you will restrict the amount of spending because you will not be able to buy what you want, but ultimately the collateral damage from that you are starting to affect the actual manufacturing chain and that is a far larger problem in the short-term.”
But he also added further, “I think if you are relying on destroying with one hand and to fix something on the other hand that it is not a great strategy. Unless you handle the inflation now you are going to have a real problem. Because once the ‘Inflation Gennie’ is out of the bottle as they found out in the 70s, it was out there for a decade!”
“Inflation is a disaster. Look at countries like Venezuela or any of those countries that have gone through rampant inflation, it destroys a generation. Major economies like the US, the UK, and several other European countries have been through it in the 70s. It took them a decade to recover. And so, Janet Yellen who is meant to be the smartest person on the block, in charge of fiscal policy of the US in terms of its management, can’t sit there and just hope that another crisis is going to fix this problem. You have to come up with perhaps a strategy that doesn’t rely on another crisis.”
As a result of the Covid-19 outbreak, unconventional credit policies and peacetime fiscal expansion have been implemented. Fiscal expansion is defined as a rise in economic spending as a result of government initiatives. A more complete assessment of recent price inflation would be required to account for these concerns.
