Last year started a whole bunch of things that we were kind of counting on being over by now, among those was a massive global supply chain disruption. And not only is it not going away, but it looks like it’s actually getting worse.
Average delays of Cargo ships from Asia to North America has hit its highest point since the pandemic with the average shipment being 12 days late according to eeSea. A WSJ reporter did a story on Christmas supplies coming in from Germany that have already been stuck at sea for 3 months.
These delays along with higher labor costs are causing companies to sound the alarm on product availability for the rest of the year and especially the holiday season. The Wallstreet Journal reported that Costco product prices have inflated 3.5% to 4.5% due to these factors and they also said that many regular items are commonly sold out in two weeks.
Recent news from other retail CEOs said that only 60% of what was ordered of everyday items like paper towels and toilet paper were being delivered (Here we go with the tp hoarding again).
On top of retail strains, the new car market is still in shambles with this chip shortage that many say will last well into 2022. The lack of new car production has led to material prices for platinum and palladium to experience their largest monthly drop since 2011.
The real kicker economically here is that all this is going on while the amount of cash being held by households is at its highest point since 2017 at a total of $16.5 Trillion Dollars. Talk about all dressed up and nowhere to go.
Common sense says that the supply chain will eventually sort itself out, but with how deep these backups go, it’s has become clear that this will not happen overnight. And until it does happen, low supply and high demand could have price inflation on a tear for a while longer. Will prices go back down once order is restored? Or will this short burst of inflation work its way into the long term averages to stay? We don’t yet know, but in the meantime, I’d probably start holiday shopping a little early this year and stock up on toilet paper again. We could be in for a long winter.