Worldwide Supply Chain Shortages Could Persist Until 2023 as Spending Outpaces Supply

Fueled by a surge in U.S. household spending that continues to outpace supply, experts said global supply chain shortages and snags may take until 2022 or 2023 to even out unless Americans stop buying so much, the Associated Press reported. Even amid the COVID-19 pandemic, consumer demand has been bolstered by factors like stimulus cash and thriving stock markets, spurring shortages in the U.S. and much of the world.

"Demand is completely skewed," said Bindiya Vakil, CEO of Resilinc, a supply chain management consulting firm. "This has now become more and more painful by the day."

But consumers aren't the only ones to blame for the shortages. Companies are ordering and stockpiling more goods and parts than they actually require in fear of running out. This stretches suppliers even thinner and makes it unlikely that they can ever catch up while demand, particularly for goods rather than services, is still roaring, the AP reported.

Spending is expected to start slowing when inflation begins to push certain goods outside the threshold of American budgets. Boosted by food, gasoline and housing purchases, consumer prices have jumped 6.2 percent in the past year and pushed inflation to its highest pace since 1990, according to the AP.

Though experts expect spending to ebb eventually, manufacturers don't anticipate the interconnected pressures of demand, supply chain woes and inflation to ease for the time being.

For more reporting from the Associated Press, see below.

Supply Chain
Fueled by a surge in U.S. household spending that outpaces supply, global supply chain shortages and snags may take until 2022 or 2023 to even out unless Americans stop buying so much. Trucks line up to enter a Port of Oakland shipping terminal on Wednesday, November 10, 2021, in Oakland, California. Noah Berger/AP Photo

A chronic lack of computer chips has forced Ford Motor Company to revamp its system of ordering parts that require long periods from order to delivery to try to address shortages.

"It's highlighted that the "just-in-time" operating model that's been prevalent in autos may not be the right operating model," Hau Thai-Tang, Ford's chief operations and product officer, told analysts.

Smaller companies, too, have felt compelled to build up as many supplies as they can so they can still make products. Moriarty's Gem Art near Chicago, a family business for 40 years, has been stocking up on gold, silver and platinum to make necklaces and rings, desperate not to run out of supplies as holiday orders pick up.

"We're ordering a lot more than what we actually have orders for — just in case," said Jeff Moriarty, the marketing manager.

Even a normal post-holiday shopping lull, though it might help, isn't expected to be enough to unclog ports, speed shipping traffic or allow factories to replenish inventories.

"The baseline expectation for improvement is around the middle of 2022," said Oren Klachkin, lead U.S. economist for Oxford Economics. "But I think the risks of that happening later are fairly high."

Though Americans have increasingly ventured out in recent months, the balance between spending on goods and services remains skewed. The pent-up demand that followed the economic recovery is still tilted toward goods like furniture and cars and less toward haircuts, concerts and restaurant meals. Though services spending has grown in recent months, it isn't nearly enough to close the gap.

Since April 2020, consumer spending on goods has jumped 32 percent. It's now 15 percent above where it was in February 2020, just before the pandemic paralyzed the economy. Goods account for roughly 40 percent of consumer spending now, up from 36 percent before the pandemic.

U.S. factories have tried mightily to keep up with demand. Production rose nearly 5 percent over the past year, according to the Federal Reserve, despite periodic ups and downs, including disruptions to auto production caused by chip shortages.

Imports have narrowed the gap between what America's consumers want and what its factories can produce. From January through September this year, the U.S. imported 23 percent more than in the same period in 2020. In September, thanks to surging imports, the U.S. posted a record deficit in goods trade: Imports topped exports by $98.2 billion.

Voracious demand for goods has accelerated as more people have become vaccinated in wealthier countries. Yet in poorer countries, especially in Southeast Asia, the spread of the Delta variant forced new factory shutdowns in recent months and crimped supply chains again. Only recently did it start to recover.

At the same time, many U.S. workers have decided to quit jobs that had required frequent public contact. This created shortages of workers to unload ships, transport goods or staff retail shops.

Ports clogged up. Last month, 65 ships waited off the California coast to be unloaded at the ports of Los Angeles and Long Beach — two weeks' worth of work. The average wait: 12 days. That has since worsened to 78 ships, with an average wait of nearly 17 days, despite around-the-clock port operations beginning in October.

Before the pandemic, ships had set arrival times and went straight to a berth for unloading, said Gene Seroka, the L.A. port's executive director. Now, with Asian factory output at record highs, the port is moving record levels of goods. Yet it's not enough to meet the demand.

Seroka doesn't foresee the shipments easing even next year. Retailers have told him they plan to use the slower months of January and February — if they actually are slower — to replenish inventory.

As with ports, rail lines are moving more goods. Through early November, freight shipped by America's railroads was up 7.5 percent from a year ago. Truck shipments were up 1.7 percent in September. Yet there aren't enough drivers or trucks to move all the freight.

In China, too, manufacturers are struggling with shipping delays, container shortages and cost increases. Shantou Limei International Ltd., which makes children's toys in the city of Shantou, expects sales to fall 30 percent this year because of delays and costlier shipping.

"The most serious problem for us is being unable to deliver goods on time because of the difficulties in securing freight containers," said Frank Xie, the company's general manager. "A lot of things have gone beyond our controls and expectation."

Persisting Supply Chain Issues
Experts say unless more spending shifts back to services or something else motivates people to stop buying, it could take well into next year or even 2023 before the U.S. and global supply chains return to some semblance of normal. A cargo ship stacked with shipping containers is docked at the Port of Los Angeles Wednesday, November 10, 2021, in Los Angeles. Marcio Jose Sanchez/AP Photo