Treading water won’t keep recovery on course
The post-pandemic economy is taking shape and our latest Index suggests the US, rather than China, will set the pace heading into the second half of the year. Economists predict that economic output in the US this year will grow at the fastest rate since the 1980s. Our data shows cumulative transaction volumes across US supply chains have accelerated past China which had been leading the global recovery up to this point.
Global transaction volumes rose by 9% in Q2, but recovery is far from smooth sailing
Order volumes across retail and manufacturing industries are rising at record rates, though demand-supply imbalances are still widespread. China’s factory output has hit rough waters as global supply chain bottlenecks have weighed on production. Transaction volumes between Chinese buyers and suppliers on our platform dropped by a double-digit margin in Q2.
The squeeze on supply chains is complex and multifaceted, but lack of cashflow is a recurring theme among suppliers struggling with increasing demand. Our latest Index shows the gap between new orders and payments to suppliers has increased dramatically over the past quarter.
In a recent article for the Washington Post, Tufts University professor Daniel Drezner claims global supply chains are not fragile and the geopolitical risks to them have been exaggerated. Supply chain activity has certainly bounced back strongly since the lows of Q2 2020. What Drezner does not say, however, is that very few companies got through the past year without making changes in order to build additional resilience to challenging conditions.
We might be inching back toward normal, but any business expecting to come out of the pandemic the same way they went in is likely in for a surprise. Think about the transformation of working patterns over the past year: offices may be reopening, but our data suggests companies have seen numerous benefits from enabling employees to connect and collaborate with one another digitally.
Preparing for future hypotheticals can seem a little like buying insurance. But if investment focuses on digitally connecting people and process across the entire value chain, it will pay back in multiples over time — not only minimizing future losses but boosting productivity and transforming the relationship between buyers and suppliers.