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Omicron fallout and tough labor talks likely to rattle supply chains and fuel inflation


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SOURCE: https://www.washingtonpost.com/business/2022/01/15/omicron-supply-chain-inflation/
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Summary

Worker shortages caused by the omicron coronavirus variant and haggling over a new dockworkers contract are likely to aggravate costly supply chain jams over the next several months, clouding prospects for quick relief from the highest inflation in four decades.The White House says the worst supply snarls may be in the past, noting that key Southern California ports are shrinking their cargo backlogs and transpacific shipping costs have plunged by more than one-third from their mid-September peak.But the cost of sending a standard metal container from China to the U.S. West Coast remains more than three times what it was one year ago and is expected to remain elevated through the first half of the year, fueling painful annual inflation readings, according to the Freightos index and industry executives.Freight is taking longer than ever to cross the Pacific, with goods requiring an average of 113 days to travel from Chinese factory gates to American hands, according to data from Flexport, a freight forwarder. “So, we’re not really seeing yet the kind of progress we, essentially, all forecasters, really thought we’d be seeing by now, and that’s really what’s driving it.”In a statement Thursday, Cecilia Rouse, head of the president’s Council of Economic Advisers, cited “potential improvement in prices for supply-chain related goods and services” in December as contributing to the smallest increase in wholesale prices in more than a year.Likewise, the administration claims “very significant progress” on getting goods to move faster through major ports, National Economic Council Director Brian Deese told reporters this past week, citing a 40 percent decline in the amount of time that containers are sitting on docks in places such as Los Angeles and Savannah, Ga.Despite these improvements, companies on recent earnings calls complained of continuing supply constraints.Garth Hankinson, chief financial officer of Constellation Brands, which makes Corona beer, said he expects “significant cost increases for the business, including supply chain disruption and inflationary cost pressures on product, freight and warehousing costs.”Bed Bath & Beyond CEO Mark Tritton said he did not expect any early improvement in “inventory disruptions [that] impacted our ability to meet demand during the holiday season.” And General Mills CEO Jeffrey Harmening projected that supply chain disruptions would last at least through May.The Fed’s “beige book” report on economic conditions identified similar headaches.

As said here by David J. Lynch