Supply chain disruption dents confidence

Supply-chain disruption and the spread of the Delta variant feature prominently among key business concerns in the latest survey, according to the latest global risk survey from Oxford Economics.

The September flash survey was conducted amid Delta-related disruption and mounting evidence that supply-chain bottlenecks are likely to persist.

“Our latest survey results confirm that the recent improvement in business sentiment has stalled,” said Jamie Thompson, head of Macro Scenarios. ”As well as broader concerns over the spread of the Delta variant, supply-chain disruption features prominently among key concerns.

“Strikingly, half of businesses currently affected expect supply-chain interruptions to persist beyond the middle of next year.” 

Supply-chain disruption to persist

Almost half of businesses (48%) report that their business is currently being affected by supply-chain disruption, such as material and component shortages and transportation bottlenecks.

A quarter of all those affected – 1-in-8 survey respondents – report being severely affected. Respondents generally expect disruption to persist. Only 3% of those affected by supply chain disruption foresee an end to the disruption before the end of the year.

Around half of affected businesses (51%) expect the disruption to their business to end after the middle of 2022.

More than two-fifths of respondents report that they view risks as slightly to the downslide (43%, from 44% in July’s quarterly survey) or heavily to the downside (1%, down from 5%). Only a relatively small proportion of businesses (13%, down from 15%) see risks as to the upside.

In recent surveys, businesses have anticipated a moderate rebound in global economic activity. This remains the case, with the mean expectation for world growth in 2022 edging down to 3.9% in the latest survey from 4.1% in July.

More respondents report activity in their own business returning to pre-pandemic levels. But many others still expect recovery to be delayed. Around 1-in-5 businesses expect to hit pre-pandemic levels of activity after 2022.

As in recent surveys, businesses generally expect a relatively quick global economic recovery. More than half anticipate a sharp V-shaped recovery or an incomplete V-shaped recovery in which sharp recovery is followed by GDP remaining below the pre-pandemic trend.

Businesses were also asked about the probability they attach to key global economic risks. They continue to put a relatively high weight on downside scenarios, with the greatest probability (21%) attached to a “long Covid” scenario in which Delta and other variants result in a protracted period of public health restrictions.