Ī key reason for the acute problems in motor vehicles is that automakers appear to have underestimated demand for their products after the start of the pandemic. This sector also accounted for one-third of the economy-wide increase in prices compared to a year ago. Over half of the May increase in core inflation as measured by the Consumer Price Index comes from this sector, if we include prices of new, used, leased, and rental automobiles. Supply-chain disruptions are also having a material impact on consumer prices, especially in the motor vehicle sector. Lumber prices have now rapidly come back down, falling 38 percent from their record high, in an early sign that some shortages may be short-lived. Facing a shortage of lumber, homebuilders briefly sent prices to $1,711 per thousand board-feet last month, an amount that implies a typical 2,000-square-foot house would require more than $27,000 in framing lumber alone, relative to a lumber bill of about $7,000 before the pandemic. Some increases have been especially dramatic.
Between May 2020 and May 2021, prices of commodities tracked within the Producer Price Index rose by 19 percent, the largest year-over-year increase since 1974, in part reflecting base effects. Homebuilders appear to be responding to these shortages in part by delaying new construction, as housing starts have been volatile for several months.Īnother impact of the shortages has been abrupt price increases. A record share of homebuilders, surveyed by the National Association of Homebuilders in May, reported shortages of key materials such as framing lumber, wallboard, and roofing. While no comparable survey data exist from before the pandemic, industry-specific surveys on input shortages suggest these levels are much higher than usual.ĭata also suggest these shortages are holding back business activity in some sectors. Census Small Business Pulse survey, held from May 31 to June 6, 36 percent of small businesses reported delays with domestic suppliers, with delays concentrated in manufacturing, construction, and trade sectors, as shown in Figure 2. These low inventories have caused cascading issues in industrial supply chains. Inventories of cars and homes are also at or near record lows, sufficient for just one month of car sales and 4.4 months of home sales, as compared to pre-pandemic levels of about two months for cars and 5.5 months for homes. The figure shows that while retailers had 43 days of inventory in February 2020, today they have just 33 days. But, as the economy recovered and demand increased, businesses have not yet been able to bring inventories fully back to pre-pandemic levels, causing inventory-to-sales ratios to fall. When the pandemic hit, businesses were stuck with billions of dollars in unsold goods, causing inventory-to-sales ratios to surge briefly before businesses liquidated these inventories. These ratios measure how many days of current sales that businesses and retailers could support out of existing inventories. Below, we describe the disruptions, the ways that supply chains have adjusted to disruptions in the past, and how the Administration is working to address both short- and long-term supply chain issues.įigure 1 shows that both the economy-wide and retail-sector inventory-to-sales ratios hit record lows in March. These shortages and supply-chain disruptions are significant and widespread-but are likely to be transitory. The situation has been especially difficult for businesses with complex supply chains, as their production is vulnerable to disruption due to shortages of inputs from other businesses. Others do not have enough of their products in inventory to avoid running out of stock. Some businesses report that they have been unable to hire quickly enough to keep pace with their rising need for workers, leading to an all-time record 8.3 million job openings in April. Entire industries that shrank dramatically during the pandemic, such as the hotel and restaurant sectors, are now trying to reopen. While a fast pivot to growth is good news for businesses and workers, it also creates challenges. Many consumers are making large purchases with savings accumulated during the pandemic, sending new home sales to their highest level in 14 years and auto sales to their highest level in 15 years. With the winding down of the worst of the pandemic, businesses have added jobs at a rate of 540,000 per month since January.
These are times of rapid transition for the U.S. Get Involved Show submenu for “Get Involved””.The White House Show submenu for “The White House””.Office of the United States Trade Representative.Office of Science and Technology Policy.Executive Offices Show submenu for “Executive Offices””.Administration Show submenu for “Administration””.
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