by UnHerd Staff
Wednesday, 20
October 2021
Factcheck
07:00

It’s a demand problem, not a supply chain crisis

The pinch is global, and the cause is misunderstood
by UnHerd Staff

Just in case you still think that the supply chain crisis is a Brexit effect, here’s some evidence from Germany. 

Via Julian Jessop, it’s a survey of German retailers from the IFO Institute. The proportion of retailers reporting delivery problems ranges from 46.9% in the food sector to 88.1% of car dealers to 98.9% of DIY centres. As for bicycle sellers, all of them reported problems. 

That last one is no surprise. Cycling boomed during lockdown. In Britain, America and other countries retailers have reported unprecedented demand.  

It underlines the fact that the global supply-chain crisis is misleadingly named. The problem is much more about too much demand than not enough supply. 

A report for Bloomberg — headlined “supply squeeze” — focuses on the problems at ports around the world. This includes US ports which “have some of the highest congestion rates in the world.” 

One might think that the whole system is breaking down, greatly restricting the supply of imported goods. But that’s not the case. In fact, goods are flooding into America — as the following chart shows: 

Goods imported into the US via shipping containers. Credit: Bloomberg

Imports aren’t just high compared to deep lockdown last year, but also compared to the years immediately preceding the pandemic. 

Of course, the pandemic has had some direct impact on supply. Covid outbreaks have disrupted factories and ports; key workers have been displaced. However this was also the case in 2020 and the first half of 2021. What’s different now is that demand has rebounded — in fact, it’s overshot the levels that have been expected and planned for. 

Excess demand does what it says on the tin — it exceeds supply. But, in addition, the knock-on effects can actively disrupt supply thus making the problem worse. For instance, while demand for shipping is up across the board, it is much higher on some routes than others — like the China-to-America route. To make as many of these highly profitable runs as possible, ships aren’t hanging around to load up with American exports, but heading back empty to Asia. As a result, the distribution of shipping containers is becoming lopsided as they pile up on the American side of the Pacific. 

In a way, this is reassuring. The system isn’t fundamentally broken, it’s just overstretched and unbalanced. The various backlogs will be cleared and other adjustments made — because that is what the global logistics industry does for a living. 

What’s more, the surge in demand is temporary — driven by stimulus spending and media scare stories. Instead of panicking about supply, it might be more useful to worry about what happens to the economy when the money runs out.

Join the discussion


To join the discussion, get the free daily email and read more articles like this, sign up.

It's simple, quick and free.

Sign me up
Subscribe
Notify of
guest
13 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Brendan O'Leary
Brendan O'Leary
11 months ago

Well, I agree with this:

“The various backlogs will be cleared and other adjustments made — because that is what the global logistics industry does for a living.”

But only if it is left to do so.

Government interference to “fix” capitalism, attempts at “great reset” etc will throw the whole thing off kilter

Galeti Tavas
Galeti Tavas
11 months ago

The entire article above is wrong. The writer has no clue but says what they think anyway. At least listen to an expert – this one is very good and shows it will be 2023 at the soonest till this mess begins resolving. https://www.youtube.com/watch?v=Pw51DqC-cQE

The more the government interferes the bigger mess it becomes. The senile Biden, (you go Brandon) trying to fix the ports, has now got it totally FUBAR as his making the ports run 24 hours a day now means containers are laying everywhere as the truckers (so many lost because of Newsome’s laws requiring very expensive modifications to new California pollution laws) and Trains cannot handle any more containers – it is a MESS, and at every stroke of the Government Pen it gets worse.

This is from ‘Just In Time Delivery’ in retail, manufacturing and commodities…. the infinately complex spider web of trillions of units of stuff is tangled beyond imagining.

But no, the system is broken. Watch the video.

Katharine Eyre
Katharine Eyre
11 months ago

Here’s another headline from Germany: https://www.welt.de/wirtschaft/article234510114/Lkw-Fahrer-Deutschland-fehlen-80-000-Trucker.html
After several weeks of allowing readers to revel in Brexit schadenfreude, editors have now decided it’s time to break it to the populace: while Brexit may have been a factor in the UK’s problems, Germany has the same issues and it’s time to take them seriously. With 80,000 HGV drivers needed in Germany, “looking at Britain is like looking into Germany’s future”.

andrew harman
andrew harman
11 months ago

Compelling evidence. I just posted on BBC HYS using the stats here, whilst ensuring that I made clear I had not supported Brexit. So far 5 upvotes and 10 down! It is amazing how some will cleave to their prejudices no matter what and simply double down. I should not be surprised…

Andrew Fisher
Andrew Fisher
11 months ago
Reply to  andrew harman

Well the fact that you feel the need to almost ask permission from left wing cultural commissars to post your views is rather revealing in itself. Rather like various left leading feminists and commentators who, oh so tentatively, object to biological women being erased from political debate and concern. They emphasise how ‘woke’ they are on any other issue except that of ‘trans rights’

andrew harman
andrew harman
11 months ago
Reply to  Andrew Fisher

Well plenty of Brexiters post and I do take issue with much what they say. It is the emotional determinism that many have now, on all sides, that so dismays me. I expanded with details from this article and that is downvoted. I find it hard to understand this irrationality. I think Brexit probably has not helped but some will want ot blame it all on that no matter what.
Truly an Age of Unreason.

hayden eastwood
hayden eastwood
11 months ago

Great article and point well taken.
it might be more useful to worry about what happens to the economy when the money runs out.”
This is the thing that really terrifies me. When the gravy train stops we’ll wish we had supply problems.

Jeremy Bray
Jeremy Bray
11 months ago

As a result of quantitative easing and our inability to spend much during lockdown of course an enormous demand has built up. It is good to see a sensible analysis based on facts rather than the usual politically driven superficial journalistic exposition being put forward.

Bernd Model
Bernd Model
11 months ago

„it might be more useful to worry about what happens to the economy when the money runs out.“ – the money won’t run out. The political elites have the monopoly to produce new money (common in every political system today), and they produce new money in every size deemed appropriate for their politics.
So it might not be helpful to worry about what happens when the money runs out, but what happens when such money gets worthless.

Chris Bredge
Chris Bredge
11 months ago
Reply to  Bernd Model

Monopoly money then!

Fran Martinez
Fran Martinez
11 months ago

The suppply chain problem is a world-wide problem. But the way it affects each individual country has to do with how well connected they are to other countries, how big your marke ist, etc. That’s where Brexit comes in: Brexit has made the supply chain problems worse by isolating itself.

Last edited 11 months ago by Fran Martinez
D Ward
D Ward
11 months ago
Reply to  Fran Martinez

This has to be one of the dummest comments I’ve read in a long time.

Britain hasn’t “isolated” itself. It’s left a crypto-fascist crony-corporatist anti-democratic political union. These are vastly different things.

Ted Ditchburn
Ted Ditchburn
11 months ago
Reply to  Fran Martinez

I don’t agree with this view, that I have seen, and responded to a lot recently. Shifting the accent from blaming Brexit for the various global issues, to either saying * This is not due to Brexit but Brexit makes it worse* isn’t refining the wrong assertion to make it correct, it is just rewording the incorrect assertion in a different way.