Covid-19 outbreak in Asia threatens US supply chains, inflation

Covid-19 outbreak in Asia threatens supply chains, puts pressure on US inflation

New waves of Covid-19 in Asia’s major manufacturing hubs are affecting global supply chains, possibly causing US inflation to accelerate.

The closure of key factories in Asia due to the Covid-19 epidemic could cause inflation to accelerate.

Key Asian “factories” such as Japan, South Korea, Taiwan, and Vietnam have continuously recorded more Covid-19 outbreaks in the past few weeks. Products and components made in these economies are exported to the world, including the United States.

Richard Martin, Executive Director of the Asia CEO and Administrators Forum (IMA Asia), assessed that the number of Covid-19 infections increased in the context of commodity demand of the world’s two leading economies such as the US. and China soars, causing commodity prices delivered at factories in East Asia increased by shock.

Mr. Martin commented on CNBC that any “glitches” in the global supply chain, such as the closure of key factories in Asia, could cause inflation to accelerate.

“This affects the US consumer price index faster than the consumer price index in China,” Martin added.

Reuters reported that Vietnam has temporarily closed four industrial parks in Bac Giang – where the Covid-19 epidemic is complicated. Three of them are the “capital” of the production facilities of Foxconn (Taiwan), a corporation specializing in assembling Apple products.

Inflation is the focus of investors’ attention. They fear a faster rise in the consumer price index will prompt the US Federal Reserve to raise interest rates sooner than expected.

The US consumer price index in April rose 4.2% from a year ago – the strongest increase since September 2008.

The Fed has insisted any spike in inflation would be temporary, compared with the economy hit by the pandemic last year. The Fed also said it will maintain an accommodative monetary policy.

However, in the current situation, Mr. Martin said that the Fed may be forced to raise interest rates sooner than expected. “I think the Fed is actually going to raise rates later this year. But now that’s much earlier than what the Fed is talking about, they (Fed – BTV) previously thought there was one or two left. another year before rate hikes,” Martin added.

This expert said that the manufacturing sector will also increase US inflation. US President Joe Biden’s infrastructure investment plan, if approved by Congress, will increase demand in the manufacturing sector and push up prices very quickly.

President Biden met with Democratic and Republican senators to advocate for his “huge” investment plan, including rebuilding infrastructure such as roads, broadband, and facilities, as well as investments in job training, research and development.