One truck takes a container from the Port of Savannah, Georgia. A backlog of almost 80,000 shipping containers has been created at this port. It is third in size, having around 20 ships anchoring off the Atlantic Coast, waiting to load their cargo.
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LONDON — Top executives at multiple European blue-chip companies have told CNBC that supply chain problemsInflationary pressures and labor shortages are likely to last longer than the policymakers expect.
Recent inflation reports have not done much to alleviate concerns of a higher rate of inflation. U.S. consumer price Index jumped 6.2% inOfficial data revealed Wednesday that October saw a sharp increase from one year ago. This was the largest annual growth in over 30 years, far exceeding the U.S. Federal Reserve target.
The Chinese producer price inflation rose by 13.5% each year in October. However, U.S. PPI growth was 8.6% annually which equals an all time record.
As a result of a sudden spike in demand, companies around the globe are experiencing supply chain bottlenecks. This is despite industrial production slowing down after prolonged Covid-induced shutdowns.
Ahold DelhaizeCNBC’s Chief Financial Officer Natalie Knight stated Wednesday to CNBC that she is confident in the strategy of the Belgian-Dutch Grocer for dealing with these pressures but they show no signs of slowing down.
Knight explained that inflation has been increasing. However, food accounts for a much smaller portion of our wallets than other categories. Knight noted that there are other industries where inflation appears to be higher than it does in our sector.
Knight said that rising consumer prices are expected to continue into the fourth quarter. Ahold Delhaize worked to make sure that price rises were not passed onto customers, she said.
She added that she was working closely with her vendors and economists in order to create the best’should-cost’ models. This will allow them to accept prices only that are necessary.
Knight stated that the company noticed a difference between the robust European supply, which has normalized to pre-Covid levels and the U.S. where there are “bumps on the road” in terms of recruitment. Additionally, she said that there are certain “pressure points” in the labor markets, especially transportation and distribution.
Knight stated, “I believe that our vacancy rate is fairly consistent. However, we are doing a lot more to keep it that way.”
Policymakers across major central banksSince then, they have maintained the view that high inflation, as well as the worldwide supply problem feeding into it are temporary. In recent weeks, however, numerous companies warned about increased costs in third quarter earnings reports.
It is an essential competence to manage supply issues
Different geopolitical factors have contributed to supply chain problems in various parts of the globe. Power shortages in China in recent months have impacted production, and Brexit, in the U.K. has played a major role in a shortage in truck drivers as well as agricultural workers.
However, there were concerns about the persistence of these issues. Siemens EnergyCNBC spoke with Christian Bruch CEO, who said Wednesday that industrial workers will be facing this issue “for quite some while”.
It will continue into 2022, and I believe that managing the supply chain is something we will have to do. [a long time]”He said.
“It will be an essential competence for companies like ours. It will ensure that you are able to handle these shortages and issues in the supply chain. Not only the material, but also on logistics.”
Bruch stated that the energy sector would have to be more efficient in managing shortages due to the rising demand for raw material for renewables.
Inflationary pressures are only once in every two years
Although inflation in the U.K. slowed to an unexpected 3.1% in September, analysts believe this is a temporary respite from August’s record-breaking 3.2% rise.
The Bank of EnglandConsumer price inflation is expected to reach 5% by 2022, before easing towards the end of 2023 and continuing into 2024. Standard CharteredCNBC’s CEO Bill Winters stated recently that the bank’s recent experiences point to structural inflation.
Winters stated that wage pressure is evident everywhere you look. He also noted the labor shortages and friction costs.
This to me suggests that inflation expectations have become ingrained.”
These are the following UnileverAccording to CEO Alan Jope, late October’s results showed that the British consumer goods company was experiencing “once-in-two-decades” inflationary pressure.
“We are seeing commodity inflation across really every type of input cost that we have — agricultural commodities, petrochemical commodities, paper and board, transport, logistics, energy, labor — all are moving in an upward direction,” he said.
“Our first instinct is to get on top of our productivity and save money. However, this only works once every two decades. We have increased prices because there is now an inflationary pressure.”