Key facts
- Supply chain stress is rising at its fastest pace since the early pandemic.
Supply chain stress is rising at its fastest pace since the early pandemic, pushing up logistics costs to their highest levels in nearly a decade. This is attributed to disruptions around the Hormuz chokepoint, posing a challenge for the Federal Reserve in combating supply-driven inflation.
Alarming stress across global supply chains is rising at its fastest pace since the early pandemic, according to UBS analyst Pierre Lafourcade. Ongoing disruptions around the Hormuz chokepoint and the resulting energy supply shock are pushing up input, freight, and other logistics costs. The May 2026 Logistics Managers' Index Report showed transportation costs surging to the highest level in its nearly 10-year history, while transportation capacity fell and utilization remained elevated. The report warned that this level of elevated cost has previously led to significant supply-driven inflation, which is more difficult for the Fed to combat than demand-driven inflation. Respondents forecast aggregate logistics costs will increase by 253.6 over the next 12 months. The Global Supply Chain Stress Index rose by 1.2 standard deviations in March and April, the second-largest two-month jump since July 2020. This situation raises the risk of sticky inflation even as growth slows, posing a headache for the Federal Reserve. The Fed's Beige Book also cited mounting concern among the business community about supply and freight costs.
Rising supply chain stress and elevated logistics costs risk fueling persistent inflation, complicating the Federal Reserve's efforts to manage the economy and potentially leading to slower growth.