Main reason for supply shortages: Americans continue to spend | national

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DETROIT (AP) – Take a step back from picked-up store shelves, stalled container ships, and empty auto showrooms, and you’ll find the root cause of shortages in just about everything.

Even as the pandemic dragged on, US households teeming with cash from stimulus checks, booming stock markets and rising home equity became eager to spend freely again – a lot. And because consumer demand drives much of the US and global economies, strong demand has resulted in shortages of goods in the United States and much of the world.

Add in the fact that companies are ordering – and hoarding – more merchandise and parts than they need so they don’t run out, and you end up with almost unquenchable demand that amplifies supply shortages.

This is where a big problem comes in: Suppliers have been caught so off guard by how quickly pent-up spending has come out of the recession that they likely won’t be able to catch up as long as demand remains. also robust. This is especially true as Americans, even more squatting at home than before the pandemic, continue to spend more on goods – electronics, furniture, appliances, sporting goods – than on services like hotels. , restaurant meals and movie tickets. All this demand for goods, in turn, is helping to accelerate US inflation.

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Containers line a Port of Oakland shipping terminal last week in Oakland, California.

AP Photo / Noah Berger

Unless spending suddenly reverts to services – or something else causes people to stop buying so much – it could take until 2022 or even 2023 before global supply chains regain some semblance. of normality.

“The demand is completely skewed,” said Bindiya Vakil, CEO of Resilinc, a consulting firm that helps companies manage supply chains. “It has now become more and more painful by the day.”

One of the reasons people can eventually stop spending so much is that everything just costs more now. Consumer prices in the United States have climbed 6.2% in the past year as food, gasoline, automobiles and housing catapulted inflation to its highest rate since 1990 The laws of gravity suggest that the cumulative effect of such inflation will ultimately dampen spending.

For now, however, manufacturers do not foresee an end to strong demand – and no end to besieged supply chains or mounting inflationary pressures. A chronic shortage of computer chips has forced Ford Motor Co., for example, to revamp its system for ordering parts that require long periods between ordering and delivery in an attempt to address shortages.

Small businesses also felt pressured to put together as many supplies as possible so that they could continue to manufacture products. Moriarty’s Gem Art near Chicago, a family-owned business for 40 years, sources gold, silver and platinum to make necklaces and rings, desperately trying not to run out of supplies as holiday orders resume.

Even a normal lull in post-holiday shopping, while it may help, shouldn’t be enough to unclog ports, speed up shipping, or allow factories to replenish stocks.

“Baseline expectations for improvement are around mid-2022,” said Oren Klachkin, chief US economist for Oxford Economics. “But I think the chances of that happening later are pretty high.”

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