Shortages Problem could Persist
Globally, we find that up to 40% of the supply constraints in manufacturing can be traced to shutdowns, which should have only transient effects on inflation. The same is true of the severe weather and industrial accidents that hindered microchip and auto output in 2021. Other drivers of supply constraints, such as labor shortages (which explain up to 10% of manufacturing supply constraints globally) and aging logistics infrastructure, could however have more persistent effects on supply and inflation than shutdowns.
Late last year industry experts expected supply shortages for autos to largely dissipate by mid-2022, and broader bottlenecks by the end of this year. Omicron has injected new uncertainty. Europe and China have imposed new restrictions and more disruptions could follow. All in all, supply disruptions could last for longer, possibly into 2023.
Follow & share @TransAmericanFriendship
