America is experiencing extended shortages of goods without recent precedent. The global transportation system is heavily congested, with dozens of ocean freighters waiting off California to dock. Is America’s economy beginning to emulate the former Soviet Union?
Consumer spending quickly recovered from a sharp decline from the Covid-19 pandemic. More significantly, the pandemic and the policy responses changed buying plans. Consumers shifted from dining out and entertainment to purchasing goods. Stay-at-home orders led to a demand for building supplies for DIY projects while remote schooling led to huge purchases of Chromebooks. Covid stimulus checks encouraged additional purchases.
Every economy features capacity constraints. Setting up new factories takes time; we can only ramp up production of lumber or computer chips modestly in the short run. The changes in the composition of consumer demand consequently created challenges. The labor shortages resulting from four million fewer workers have slowed efforts to expand production.
Global supply chains employ ships, planes, trucks, and trains to move parts and products around the globe. Just-in-time production involves not holding large inventories of parts and materials, requiring reliable transportation. But capacity constraints also exist in transportation. And the goods consumers wanted to purchase are either imported or assembled using imported components. Demand for transportation has increased.