Persistent supply chain difficulties hamper manufacturing and services
The economy continues to spin, continues to grow at a decent rate – although we don’t see the skyrocketing growth seen in late spring and early summer when the vaccination rate was rising, businesses reopen and people are starting to go out again after a year of pandemic shutdowns.
At least part of the slowdown we’ve seen in recent months has less to do with the withdrawal of consumers – although they did as the delta variant has spread – but rather with the ever-growing problems that companies meet in providing the goods and services that consumers want to buy.
And we had a lot more evidence from this Tuesday. Two closely watched indices that track the movement and delivery of goods and services have signaled widespread supply chain disruptions.
It’s everything from raw material shortages, to delays in shipping parts and finished products, to labor shortages in service and manufacturing jobs. All of this has resulted in a decrease in inventory, an increase in backorders and a rise in prices.
If, like me, you have a household appliance that’s broken right now – for my family, it’s the dishwasher – when you call for repairs, you might hear something like this: “Due to the coronavirus, the demand for home appliance repair has increased exponentially in the United States. We apologize for the service delays and excessive wait times this has caused.”
Multiply that by the whole economy, and you get a lot of friction for sellers and buyers of everything from parts to finished goods.
“In supply chains, a lack of raw materials, exacerbated by shipping constraints in US ports. At the same time, companies are signaling that they simply cannot recruit enough staff, ”said Chris Williamson at IHS Markit, who just reported slowing growth in manufacturing and services in September.
So let’s see how it works in a sector: the automobile, for example. Jaaron Smith, based in Vancouver, Washington, and his wife have two children, two dogs and they are looking for a second set of wheels.
“Yes, a new SUV,” said Smith, 39. “I’ve been working remotely, of course, since the pandemic, but I’ll be starting a new job in January and it’s going to require me to commute, and that means we’re going to need two cars.
Dealers tell Smith the wait for a new SUV will last several months.
The problem for automakers starts with a shortage of computer chips, according to Williamson. “If you can’t get semiconductors to make as many cars as you want, you’re also going to buy less windshields and tires,” he said.
All of this means less business for parts suppliers and higher prices for new and used vehicles. Which hasn’t stopped Smith from looking far for a new Dodge Durango. “It’s really hard to find one right now, on a lot of new stuff,” he said.
So he just ordered one for delivery. It will cost him $ 62,000. Plus, he’ll get an addition he really wants: “Ventilated seats,” he said. “I had them once, I never want to do without them.”
He expects it to arrive in late December or early January.