The supply chain that America is dependent on is going through a crisis. Thus, induced shortages mean only one thing; high prices and high inflation.
These shortages are disrupting their operations, forcing them to raise the prices. Whirlpool and Albertsons complain about the shortage of the basic products and materials.
It is increasing the cost of manufacturing for the former, while for later running their store has increasingly become a gamble.
Even restaurants are facing a shortage of ingredients and supplies. There is pressure on every link of the supply chain.
Starting from factory closures due to Covid-19 restrictions, to finding loaders, this is a universal threat spread throughout every part of the chain.
This heightens the questions concerning the danger that inflation possesses to vigorous consumer spending and recovering corporate income. Jet fuels, resins and electric components are also facing scarcity and higher prices.
Last Wednesday’s Federal Reserve’s Beige Book, reported the narrowed supply chain and labour shortages had slowed economic growth in the US.
What makes inflation and supply shortages worse, is that it is coupled with high demands for goods and raw materials from both consumers and corporates alike. Overwhelmed ports, trucker shortages and record low warehouse vacancy rates add fuel to this fire.
Companies are suffering unpredictable delays, in the delivery of the products produced in a hectic schedule.
With the crisis in the chain, they are finding it hard to get supplies at pre-Covid rates. They are trying to offset it by raising the prices or finding alternatives.
P&G’s chief financial officer said that it would increase the prices of nine of its 10 categories of products in the US after it warned that the supply chain costs would be higher than anticipated. So would PepsiCo and Tesla.
Even though the executives expect this condition to extend till 2022, but have apprehension about raising the prices as they are not sure about how long this inflation may last.
They fear such a trend will affect the consuming power of a US consumer.
The companies are aware of this fact but they are helpless in preventing price rise, as the supply shortages and port congestion continue. To ease port congestion air cargo has increased.
This is the condition in the US, and is not much different in other countries.
In China, the supply chain disruptions are causing scarcity both domestically and internationally, severely affecting the automobile industry. In India, it almost disrupted the Navratri market and gave a near fatal strike at the market.
All of these economies are hoping to recover from the pandemic and restore the economy to full scale by 2022.