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Backlogs And Bond Yield Backups

Mar. 09, 2021 10:59 AM ET3 Comments
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  • Global supply chain disruption as a result of the pandemic has resulted in substantial backlogs and upward pressure on prices.
  • This has had a direct impact on commodity markets and is starting to impact bond markets (higher treasury yields).
  • While rising backlogs are typically a transitory force on prices, we are in an unprecedented macro-market environment and the upward pressure on prices could be more enduring.

Regular readers might recall back at the start of the year I published my 10 Charts to Watch for 2021. The number 2 chart showed the global backlogs indicator, I noted:

"(the issue of backlogs) has 2 key implications: upside risk to inflation, and a likely spike in activity as firms attempt to clear backlogs and restock inventories"

I thought it would be timely to take a look at this topic and expand a little bit because it is having such an important impact across a number of the key markets.

Also, I recently took the chance to survey my followers on LinkedIn and Twitter to see what the thinking was around how long these supply chain/logistics/backlogs issues would take to clear... consensus is it will be *at least* a 6-month thing, with around 50% of respondents seeing it staying with us through to 2022.

That's pretty significant, especially given the impact this issue is already having on pricing pressures, commodities, and perhaps even other markets...

The Chart

Here it is: the chart shows the global composite indicator for backlogs - which is mapped out against the pricing pressure index (both are based on the global PMI data). There is a very clear historical linkage where surges in backlogs tend to be followed by a surge in pricing pressure. This time is no different.

Not being satisfied with one data point, I decided to make a composite Google search trends indicator [looking at terms such as: shipping delay, out of stock, restocking] to seek confirmation (or otherwise), and indeed, we can see that there remains heavy interest in this topic... which we can construe that people are at least interested in this issue - but likely also are increasingly impacted by it.

But wait... what are we even talking about and

This article was written by

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