All across the spectrum in nearly every economic sector, shortages are plaguing the supply chain. This is exacerbating an already inflationary environment to the point that Weimar-style hyperinflation could be the next domino to fall.
"Our worldwide supply chain, and ability to provide products and services to you, is being significantly impacted by increased prices resulting from labor and raw material shortages, escalating raw material prices, manufacturing delays and transit interruptions," says Bank of America Chief Investment Officer Michael Hartnett.
"Stated directly, our costs are increasing and are much more volatile than in the past," Harnett added, pointing to several factors that are making the situation worse rather than better.
Earlier in the month, we reported that coffee prices were on the rise due to supply chain disruptions caused by shortages in shipping containers where they needed to be. Now it appears that most other sectors are seeing similar disruptions.
A majority of manufacturing firms across multiple sectors reported in a recent Atlanta Fed survey that supply chain disruptions are negatively affecting production. Nearly 60 percent of respondents say they have had to find new suppliers due to these disruptions while 58 percent say they have had to start building extra inventories.
"Additionally, 38% of businesses in the Atlanta Fed's survey reported that supplier delays were moderate to severe, while 49% of Dallas Fed respondents reported that disruptions had meaningfully raised input prices," Zero Hedge reports.
"Overall, these measures suggest that supply chain disruptions are dramatically and adversely impacting business operations, and leading to far higher prices."
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Goldman Sachs also issued a report on supply chain disruptions that were populated with information released in media reports. It reveals that supply chain disruptions are "very widespread" now, extending far beyond just semiconductors and auto productions.
Many other consumer goods, from headphones to roller skates to sofas, are facing supply challenges that could make these products scarce and much more expensive in the coming weeks and months. And the root behind these widespread shortages is essentially the same across all sectors.
"First, manufacturers were caught off guard by a faster-than-anticipated recovery in demand and hadn't ordered enough inputs in advance to meet production needs," reports explain.
"Second, the increase in goods demand while transportation services are limited by the virus has led to an undersupply of shipping containers and congestion problems at West Coast ports, resulting in lengthy shipping delays."
The Federal Reserve claims that the current burst of inflation is "transitory" and will eventually go away, despite indicators to the contrary. Even if it is transitory, though, the consequences will be heavily felt in the form of continued shortages and skyrocketing prices.
"Neither of the above two problems should abate soon," Goldman Sachs contends about the above two data points – that is until "widespread inoculation" occurs both in the United States and in the countries with which it does trade.
In other words, getting vaccinated for the Wuhan coronavirus (Covid-19) is now being dangled like a carrot in front of Americans wanting to get back to "normal" with the healthier economic conditions that were seen during the presidency of Donald Trump.
"Goldman estimates that elevated shipping costs are currently boosting year-over-year core consumer price inflation by roughly 9%!" reveals Zero Hedge, further noting that Goldman Sachs expects shipping prices to remain elevated until early 2022.
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