- Three global traffic jams are intensifying the supply chain crisis plaguing the economy.
- European factories are backlogged, Asian factories are struggling, and ports are congested in the US.
- It means Americans will keep paying more and waiting longer for their purchases as the holidays near.
- See more stories on Insider’s business page.
Americans just can’t catch a break when it comes to shopping this year, shelling out big bucks only to wait weeks or months for their purchases.
Manufacturers struggled to estimate demand in a work-from-home economy and halted factory production for safety reasons early on in the pandemic, which resulted in a shortage of materials. As unpredictable consumer behavior surged earlier this year, imports picked up speed, clogging shipping ports and resulting in shipping delays. Bad weather, from February’s Texas Freeze to the drought in Brazil, only compounded matters.
Pent-up consumer demand was no match for supply shortages and bottlenecks, causing businesses to jack up prices and inflation to hit Americans’ wallets during the spring. By July, both the supply crunch and inflation showed signs that they could slowly be abating as major retailers saw fewer imports that month and price hikes waned.
But three global traffic jams are posing a new challenge to rebalancing the supply chain, indicating that Americans may need to get used to waiting around and paying more for the things they want.
Global traffic jams
As the Delta variant rages on, sparking a resurgence in coronavirus infections, the supply chain is getting backed up across the globe.
Factories in Europe, short on materials and lacking shipping capacity, grappled with unprecedented orders last month. An IHS Markit survey of purchasing managers showed that the backlog in supply relative to demand hit a record for the first time in two dozen years as of July.
Over in Asia, factories are also struggling. Port congestion, lockdowns, higher production costs, and a slowdown in western consumer spending have all hindered their production, reported The Wall Street Journal. Factories from Vietnam to Malaysia have had to shut down entirely or downsize their workforces.
And one of China’s busiest ports closed temporarily in August after a worker tested positive for COVID, which will further hamper global shipping lines.
It’s all a big problem considering that many countries in Asia supply toys as well as components for consumer electronics and cars. “All this means that the global supply-chain bottlenecks are unlikely to get better anytime soon,” Alex Holmes, an emerging-markets economist at Capital Economics in Singapore, told The Journal.
Even if imports make it out of Asia and Europe, they might get delayed again when arriving in the US. Savannah, Georgia’s shipping port – typically the second or third stop on the East Coast for container ships arriving from these regions – is currently backed up. Its congestion rate is the highest in the US at 82%, according to data analyzed by Bloomberg News. The Georgia Ports Authority anticipates the surge continuing through the end of the year.
These global traffic jams are sending prices up for many goods, with fewer discounts – just as the holidays roll around. As Isaac Larian, chief executive of MGA Entertainment, told The Washington Post, “There’s no logical way that everyone is going to find what they want in time for Christmas. Everything is up the air.”