WWhile shortages of all kinds of goods have been a hallmark of this pandemic-induced recession and recovery, it is important to understand what is driving these problems. When we research the causes of these supply chain disruptions, we find a myriad of factors. While demand for some products, such as semiconductors and steel, has exceeded supply, overall world exports are at an all-time high. It is important to note that global industries are currently producing goods at an unprecedented rate in this globalized economy. As the following graph shows, world exports from OECD (Organization for Economic Co-operation and Development) countries collapsed with the lockdowns induced by COVID-19. However, exports quickly reversed and are now at levels above the trendline of the previous cycle of 2010-2019.
Global exports are booming, but the ability to ship these goods has yet to recover from losses suffered during the global economic crisis. For example, according to The Logistics Managers Survey, which measures the growth and contraction of transportation and warehousing capacity in the United States, the U.S. shipping industry continues to struggle to build capacity.
We can also see an example of this by looking at the number of container ships and tankers in port and mooring waiting for space at the Port of Los Angeles and the Port of Long Beach. The ports on the west coast of the United States are the closest point of entry for goods from Asia. According to the Marine Exchange of Southern California, as of September 17, there were a record 147 ships in port, at anchor and in drift areas. As a result, many goods in demand are sitting on ships waiting to be unloaded and sent to the market. This congestion can be attributed to the increase in new orders and infrastructure bottlenecks, including the lack of transportation and skilled workers.
COVID-19 closures have also led to a shift in spending from services to goods, which has increased demand for a wide range of goods contributing to supply chain disruptions. In addition, we find that other factors, such as logistics and transport constraints, also contribute. Indeed, the record number of exports exceeded the transport capacity. Eventually, these issues will be resolved as demand normalizes and transmission capacity increases. Until then, we expect supply chain disruptions to continue.
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