3 reasons the logjam of stuff to buy in the economy may be easing, BofA says
- Everywhere you turn, there seems to be a
shortageof something that you want to buy in this economy.
- But relief from all the many supply
shortagescould be on the horizon, BofA says.
- Less coverage, slightly higher inventory, and lowering demand are helping shortages peak.
Less scarcity could be on the horizon. A July 12 note from Bank of America Research found that at least a few shortages are potentially easing up. That would be welcome relief amidst a reopening economy plagued with holes, open positions, and used cars that are more expensive than newer models.
Here's why BofA's Predictive Analytics team, led by Thomas Thornton, thinks there might soon be a shortage of shortages.
Inventory and shipping isn't as tight
While inventories are still low for many goods, BofA finds that the rate of change for inventories "looks less bad," and backlogs and delivery days indexes have come down from prior peaks. That means that inventories aren't as low as they were, suppliers are less backed up, and it won't take quite as long for your orders to arrive.
However, railroad traffic is now below its pre-pandemic level, and carloadings fell in June, meaning there was lower demand for transportation of goods.
Demand for goods has eased
Something else has helped ease up shortages: People just want less stuff. Or they don't want it as much as did they back in the spring. Using card spending data, BofA finds that demand for "durable goods" has dipped from rip-roaring growth in the spring, although it's still well above 2019 levels.
But as demand for things eases, people are instead clamoring for experiences. Demand for things like restaurants, hotels, and airplane tickets is surging. As Insider's Tom Pallini reports, that could create and worsen airline-related shortages, since the industry is scrambling for both planes and pilots.
Less news coverage
Finally, many media outlets - including this one - vociferously covered the new shortages popping up everywhere, along with their material impacts on both the economy and daily life.
But BofA notes that coverage, while obviously still ongoing (as in this article), has slowed. The coverage of significant shortages in cars and electronics seems to have peaked in April and May, Thornton's team writes.
While some shortages will certainly linger - as well as their impact on the economy - the worst appears to be over. As BofA writes: "It appears that the peak supply/demand mismatch may have passed, something that has implications for pricing and growth."
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