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Supply Pressures Resurface

The supply chain in the past few months has been witnessing some level of stress. Whether it is the Red Sea or Black Sea conflict the problem of logistics have kept the cost at higher level compared to last year. Recent incident at Baltimore port has now cause this pressure to move up further. 

Whether it is the Global Supply Chain Index that has returned to positive territory after November 2023 or supply delivery time lengthening in various countries. The impact of it would be in the future costs especially in the short term. 

The main issue that would worry corporates would be whether to pass on these cost increase or not. Given that even some commodity prices have increased, it is likely that they pass on the increase to keep the margins at current levels. 

In this case , CPI might witness further rise as currently goods inflation is limited to food and energy. It would then make it difficult for central banks to provide a define path for rate cuts. 

If they decide to hold back and not pass it then next few quarters would witness lower margins and this might lead to a correction in the equity markets for the remainder of the year.


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