The European Central Bank published Working Paper No 3015 presenting a new suite of supply indices designed to track supply conditions in the euro area following the COVID-19 pandemic and the invasion of Ukraine. The paper builds indices for the total economy as well as for selected industries, sectors and countries, and finds that supply conditions in the euro area remained tighter for longer than in other areas, with pronounced heterogeneity across industries, sectors and countries (the views are those of the authors). The suite includes a recomputed supply chain pressure index aligned to the Global Supply Chain Pressure Index (SCPI-R/RS), a more robust version that adds alternative shipping and euro area shortage indicators (SCPI-D/DS), and a broader measure that also incorporates the COVID-19 stringency indicator (SCPI-X/XS). The indices decompose tightness into drivers at origin, in transport and at destination, suggesting transport accounts for roughly half of movements overall, with air freight a key contributor during the pandemic, while destination-side factors such as labour and equipment shortages help explain why conditions remained tight later in the sample. Using the preferred SCPI-X/XS for exposition, the paper reports more persistent tightness in automobiles than in digital and food industries towards the end of the sample, a slower normalisation in services than in manufacturing and construction, and renewed transport-related pressures at the start of 2024 linked to disruptions in the Red Sea; it also shows the indices lead inflation components (energy, non-energy industrial goods and food) and labour cost measures during supply-driven episodes. The authors flag further extensions, including adding novel datasets such as domestic transport prices and developing forecasts for the indices and related supply-side variables.
European Central Bank 2025-01-31
European Central Bank working paper introduces a suite of euro area supply indices to analyse the post-pandemic supply shock
The European Central Bank's Working Paper No 3015 introduces new supply indices to assess euro area conditions post-COVID-19 and Ukraine invasion. The indices reveal prolonged supply tightness, varying across industries and countries, highlighting transport as a major factor. The paper notes persistent tightness in the automobile sector and renewed transport pressures in early 2024, with indices leading inflation and labor cost measures during supply-driven episodes.