Euro Area Supply Chain Pressures to Fuel Inflation Through 2027

Societe Generale economists Sam Cartwright and Michel Martinez have analyzed the impact of renewed supply chain disruptions, including conflict in the Middle East, on Euro Area prices. They used an adaptation of the New York Fed's Global Supply Chain Pressure Index for Europe and Asia to highlight still-elevated pressures.

The index revealed distinct responses to disruptions to trade flows through the Strait of Hormuz, indicating that supply chain pressures have been easing this summer but remain elevated. These pressures are likely to feed through to inflation this year and next.

Under different forecast scenarios, even if supply pressures continue subsiding in the coming months, Societe Generale's euro area non-energy industrial goods inflation forecast peaks at 1.8% in 2H27 before normalizing.