The current shortfalls result from a boom in demand running headlong into sharply constrained supply chains
plaguing American firms can be found throughout the Federal Reserve’s “Beige Book”, a survey of economic conditions across the country that is published eight times a year.A daily newsletter with the best of our journalismby Drew Matus of MetLife Investment Management, an institutional asset manager, mentions of the word “shortages” in the Beige Book have surged. Its latest incarnation, published on October 20th, used the word 70 times.
. Starting in 2020, when the pandemic kept many at home, Americans went online to buy everything from new televisions to flatpack sofas. Helped along by stimulus cheques from the government, the demand for consumer goods has only strengthened this year. Businesses are struggling to keep up. Shortages of dockers, truck drivers and rail workers have made it harder to move goods around America. And shifting products around the world is now both much more expensive and much slower than usual, in part because of pandemic-related port closures in China. According to Freightos, an online freight marketplace, the average cost of shipping a 40-foot container from Shanghai to Los Angeles is about $17,400, compared with just $3,700 a year ago.
Supply-chain bottlenecks, meanwhile, may not be resolved for months. IKEA, a Swedish furniture giant, expects the disruptions to continue into 2022. As for the microchip shortage that is depleting car inventories and dragging down sales, dealers in New York report to the Fed that they see “no end in sight”.
For the Fed this poses a dilemma. The mismatch between soaring demand and stunted supply has contributed to a big jump in inflation. Many analysts expect that the central bank will next month announce plans to rein in the ultra-loose monetary policy unleashed at the depth of the pandemic. Some tightening could help cool down overheated consumer spending. But it will not help businesses restock their depleted shelves, and could make it harder for small companies to stay afloat.
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