Opinion | The supply chain crisis is causing a global economic mess and chaos for businesses. It may be a headache now, but it's about to get a lot better. By Neil Dutta of RenMacLLC.
First, the most obvious is that consumption that requires close physical proximity to people has suffered – restaurants, travel and tourism, and recreation spending such as movie theaters all slowed as coronavirus infections rose.
Second, when consumers have sheltered in place, they have wanted something to keep themselves occupied at home. This drove up demand for household durable goods – electronics and appliances, cars, and furniture. Between many not suffering any income loss during the pandemic to the government's robust response, consumers have had plenty to spend.
Third, an increase in infections kept people off the job, as they adhered to quarantine rules. This has been particularly disruptive in those occupations that cannot be done remotely, such as manufacturing. And the issue has popped up repeatedly across parts of Asia, an early part of the global supply chain and a major source of imported consumer goods.
Notice that during COVID disruptions, supply chains are impacted in two ways. First, the demand for durable goods tends to rise and second, production tends to moderate. It's not hard to see why prices have jumped. Let's start with consumption. The nearby figure shows real consumption, consumption in goods and consumption in services all indexed to 100 at February 2020, just before the pandemic.
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