Thoughts From The Divide – Supply Chain Fear
“Something called ‘supply chains’”
Another week, another round of supply chain headlines. The Empire Fed’s Manufacturing Survey saw Delivery Times “inched up to a record high”. Business behemoths continue to announce production cuts. Toyota is expecting its “global output for November to fall by as much as 15 percent… due to difficulty securing parts amid pandemic-disrupted supply chains and a semiconductor crunch”. And Apple told “its manufacturers that the number [of new iPhones it would produce this year] would be lower because chip suppliers… were struggling to deliver components”. Policymakers are and have been aware of the issues. The latest Fed minutes mentions supply “constraints” or “issues” six times in the “Staff Economic Outlook” alone. And building on an executive order issued in February, President Biden formed a Supply Chain Disruption Task Force back in June.
However, there appears to be some mind-focusing pressure being applied by the American consumer. With articles like this one popping up, advising that you “start your holiday shopping now” since “shortages of goods and price hikes are likely to get worse as winter approaches”, politicians are beginning to take note. (Perhaps rightly so… the American drive for the perfect holiday gift is known to cause “near riots” and is immortalized in the movie Jingle All the Way). White House officials admitted this week that “there will be things that people can’t get” this holiday season, and President Biden himself is attempting to assuage any fears of holiday turbulence. Speaking Wednesday, Biden discussed “how hard it is to get a range of things from a toaster to sneakers to a bicycle to bedroom furniture” and announced that several major ports and businesses would be working “24/7” to “address global transportation bottlenecks”. While some are saying that the supply chain is too snarled for these efforts to “ease supply shortages and tame rising prices in time for Christmas”, there’s some (slim) hope that things are not quite as dire as they appear? As the NFIB reports, yes, only 10% of business owners reported no impact from recent supply chain disruptions. And, yes, according to NFIB’s Chief Economist, Bill Dunkelberg, businesses are unable to “receive the needed supplies and inventories”. But despite any setbacks, reports of inventory increases are “back into positive territory” at net 3%, “the highest reading since the pandemic started”.
P.S. Amid the pinch that the hospitality industry is feeling from the general labor shortage (see the comments from ISM Services, discussed last week), employers also appear to have retention problems. As August’s JOLTS data reported this week, the quits rate for the hospitality industry is more than double the (record) national average, with 6.8% of workers throwing in the towel (if you will) compared to 2.9% of workers nationally.
