New waves of coronavirus in major manufacturing hubs in Asia could hit global supply chains. Notably, that could cause inflation to increase quicker in the United States,
Asian manufacturing economies, Japan, South Korea, Taiwan, and Vietnam, have reported a renewed coronavirus outbreak in the last few weeks. Products manufactured in those economies are shipped globally to places as far as America.
As we know, China and the United States are the world’s top two economies. According to Richard Martin, managing director of IMA Asia, the rise in infection rates has come as demand for goods from the U.S. and China has contributed to a swift rise in factory-gate prices in East Asia.
Martin added that any problem in the global supply chain, such as the shutdown of main factories across Asia, could result in a big push-up in inflation. He reported that it goes through to consumer prices in America faster than it goes into consumer prices in China.
Additionally, Vietnamese authorities have temporarily shut four industrial parks in the northern province of Bac Giang. Besides, three of those industrial parks house production facilities of Taiwan’s Foxconn, a major assembler of Apple products.
The U.S. consumer price index increased 4.2% in April from a year ago
Inflation has been a major focus among investors who are concerned that a quicker surge in consumer prices would prompt the Federal Reserve to increase interest rates earlier than anticipated.
The U.S. consumer price index increased 4.2% in April from a year ago, which is the sharpest rise since September 2008.
The Fed had previously announced that any rise in inflation would be temporary given that it’s compared against last year’s pandemic-hit economy. The central bank also revealed that it would keep monetary policy loose.
Martin announced the Fed may be forced to raise interest rates sooner than anticipated. He also said the U.S. manufacturing sector would add to inflation. President Joe Biden’s big infrastructure spending, if it passes through Congress, will boost demand in manufacturing and push prices up.
U.S. President has been meeting Democratic and Republican senators to rally support for his massive package that includes rebuilding U.S. infrastructure, including roads, broadband, and utilities, and investing in jobs training and research and development.