![]() ![]() Monteiro, “ Fed’s Higher Inflation Forecasts Tied to Widening Supply Bottlenecks,” Bloomberg, June 17, 2021, 7. Vaughn, “ Used Car Prices Are Going Nuts! Here Are 10 of the Biggest Price Jumps,” Autoweek, July 30, 2021, 6. Automotive Forecast for June 2021,” Yahoo, June 25, 2021, 5. Shepardson, “ Ford Again Trims Truck Production Due to Chip Shortage,” Reuters, Sept. Wayland, “ Chip Shortage Causes Ford to Slash Vehicle Production at Several Plants in July,” CNBC, June 30, 2021, and D. Wayland, “ Chip Shortage Expected to Cost Auto Industry $110 Billion in Revenue in 2021,” CNBC, May 14, 2021, 3. Kulisch, “ Are You Shipping Me?!? $32,000 Container Move From China to LA,” American Shipper, July 30, 2021, 2. Shipping costs skyrocketed: The cost to ship a container from Asia to the United States’ East Coast climbed from around $1,400 per container to around $20,000.ġ. The result was long delays, with ships anchored for weeks outside major ports - and a consequent shortage of maritime containers that were stuck on waiting vessels and could not be reloaded and shipped. The entire transportation and distribution system was not built to add capacity at the rate the flow was growing, and labor shortages exacerbated the problem. As Western countries swung back to higher levels of economic activity, ports could not process the increased shipping volumes. Early in the pandemic, transportation systems were strained by restrictions on air travel and quarantine requirements on vessel crews and interstate truck drivers. But contrary to what standard economic theory about reaching supply-demand equilibrium suggests, prices have risen throughout the economy - in many cases substantially - while shortages have persisted.Ĭonsider, for example, freight transportation. Typically, short-lived supply crunches dissipate quickly as rising prices suppress demand and increased supply restores market equilibrium. During the pandemic, manufacturers could not adjust in time to bridge gaps between supply and demand as they dealt with ongoing labor and material shortages, intermittent plant closures, and shipping delays. Such a dramatic shift would have strained manufacturing in the best of times. A shift to working from home, along with school closures, fueled increased demand for larger houses, home gadgets, computer and communications gear, furniture, toys, and recreational equipment. Evidence-based resources that can help you lead your team more effectively, delivered to your inbox monthly.Īs the pandemic took hold in March 2020, consumer demand patterns shifted abruptly. ![]()
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