Economic Demand Is Back. Supply Is the Problem.
The difficulty in obtaining raw materials and workers has long-term implications for prices, growth and corporate balance sheets.
Shipping bottlenecks are just part of the problem.
Photographer: Islam Safwat/Bloomberg
What a difference a year makes for many corporate bosses in advanced economies. Some 12 months ago, they were dealing with the sudden and brutal disappearance of demand for their products. Today, demand is not a problem for most of them; it is surging. Rather, they are struggling to secure supplies, including the raw material inputs and workers needed to meet this demand — the consequences of which will determine much more than corporate success.
Strong consumption and investment, enabled by economic reopenings and solid corporate and household balance sheets, are bolstering aggregate demand to a degree that has surprised many, be they executives, economists, policy makers or Wall Street analysts. It is a phenomenon that is likely to persist in the months and quarters ahead, especially in those countries that are able to contain Covid-19 infections, vaccinate many citizens and guard against new variants of the virus.