(RepublicanPress.org) – The laws of supply and demand state that prices typically come down with an abundance of supplies. But, the opposite is also true; when there is a problem with the availability of supplies along the distribution chain, the price of those items will rise because there’s too much demand and not enough product.
Although the United States and the world still see constraints on the number of goods and services available to the public keeping inflation high, people and the economy are ready for business to return to normal. But, the most knowledgeable central bankers shared on September 29 that they believe price spikes will last a bit longer than previously thought.
The 2020 Supply Chain
To figure out what is happening with disruptions in 2021, it helps to look at the root of the problem. In March 2020, an Institute for Supply Management survey revealed that about 75% of companies dealt with a supply chain issue due to the pandemic.
Shutdowns and sicknesses caused delays in the production of goods and the path to bring those goods and materials to manufacturers and retailers for consumers. Although supply chain issues are nothing new, the length of the extended crisis caused issues for manufacturers that their existing procedures didn’t take into account. Some of the most heavily hit industries included mining, jewelry, and automobiles due to the effect on employment issues in those sectors, which suspended and delayed production.
Federal Reserve Chair Jerome Powell believes the supply chain issues that started in 2020 and continued into 2021 won’t resolve anytime soon. Unfortunately, he predicts that the problems will continue in 2022, causing bottlenecks in various industries and keeping prices up.
Although economists previously thought these disruptions were likely to end soon, the issues remain. According to ECB chief Christine Lagarde, the problems “in some sectors are accelerating,” which is terrible news for the economy and consumers who are also struggling to stay afloat.
Flow issues in the production and distribution of materials and goods are pushing prices of consumables up because the supply is not meeting the demand. That fact is causing an increase in inflation that exceeds temporary status, which may have long-term consequences.
As inflation numbers continue to rise, it may change the way people think about inflation. And if that happens, could the once-thought temporary bump in prices become a permanent baseline in everything we buy?
Copyright 2021, RepublicanPress.org