According to data released by the American Institute of Supply Management (ISM) on August 2, the ISM manufacturing index fell for the second consecutive month, reaching 59.5, the lowest since January. The main reason is that the shortage of raw materials has slowed down the operation of the manufacturing industry.

Also slowing down is China’ s Manufacturing Purchasing Managers’ Index (PMI). China’ s PMI was 50.4% in July, 0.5 percentage points lower than in June. Although it continues to be above the critical point, the overall manufacturing industry continues to expand, but the pace is slowed down.

Recently, the frequent occurrence of extreme weather around the world and the resurgence of the COVID-19 epidemic dominated by the delta mutant strain have impacted the normal operation of the global supply chain, thus affecting the pace of economic recovery of major countries.

The U.S. manufacturing index declined with a measure of output, and the backlog of orders rose slightly to a relatively high level, indicating that the growth of the U.S. manufacturing industry was constrained by supply and transportation challenges.

"It is still difficult for companies and suppliers to keep up with the growth in demand," Timothy Fiori, chairman of the ISM Manufacturing Survey Committee, said in a related statement. The length of time is close to record highs, the continued shortage of key basic materials, the rise in commodity prices and the difficulties in product transportation."

At present, the bottleneck of the supply chain faced by American manufacturers has had an impact on the recovery of the US economy. The raw materials and parts necessary for enterprise production are difficult to ship in time, and the final finished product is also delayed in delivery. This has become a realistic challenge that many American companies have to face. The combined effect of many extreme events around the world has pushed the global supply chain to the risk of breaking points, threatening the already fragile international freight flow due to the epidemic for more than a year.

Europe, which has been hit hard by floods and epidemics, is also facing the same dilemma. Western Europe is an important transportation hub for global transportation, and its floods have caused huge damage to the railways used to transport goods and raw materials.

Pawan Josie, executive vice president of European supply chain software company E2open, said that with the start of the shopping season, consumer electronics, bedroom furniture, clothing and electrical appliances will be in a state of insufficient supply. Floods flooded into the industrial area, causing serious damage to warehouses and equipment, and the supply of products and raw materials is being destroyed. Moreover, the delay in the transportation of raw materials required for production will have a knock-on effect, resulting in supply shortages for weeks or even months.

The survey results released by the German Ephesus Economic Research Institute on August 2 show that the shortage of parts and primary products is becoming a problem facing German industry. The survey shows that about two-thirds of German industrial companies are affected by material shortages and may drag down German economic growth.

The Kiel Institute of World Economics in Germany believes that at least until the end of this summer quarter, supply chain bottlenecks will affect industrial production. The Institute’ s economist Genn predicts that “for the entire year of 2021, (the supply chain bottleneck) may bring about 25 billion euros in losses to the German economy.”

 China is also being affected by the delta mutant strain epidemic and local flood disasters.

According to Wang Zhe, senior economist at the China Caixin Think Tank, a few days ago, as the PMI-related data survey of Caixin China in July coincided with the end of the epidemic in Guangdong and the outbreak in Jiangsu, the service industry was prosperous, and the manufacturing industry was slightly weaker in comparison. The epidemic in some areas at the end of July is expected to have a negative impact on PMI in August.

After the new coronavirus pandemic and extreme weather affected industrial production, the shortage of container ships and port blockages around the world, coupled with high consumer demand for materials and commodities, caused freight rates to soar to record levels.

The soaring freight in turn affected the normal operation of the supply chain. Because the shipping price is too high, even higher than the value of a box of goods, European and American customers are increasingly unable to bear relatively high prices of Chinese goods.

A person in charge of a foreign trade company in Tianjin, China revealed that the company’ s shipments have been much smaller than before. A salesperson of a freight forwarding company in Guangzhou, China who did not want to be named also revealed that shipments have been declining in recent months. The skyrocketing shipping prices are affecting China' s industrial competitiveness and supply chain. Given that 90% of the world' s international trade relies on ship transportation, this deepening epidemic crisis and frequent extreme weather disasters pose a major threat to the global dependent supply chain.