In Belgium, some supermarket shelves have been empty thanks to a strike at a distribution centre. In much of China there are power cuts and electricity rationing. In Europe, there is a gas shortage with prices five times or more US domestic-gas prices. The failure of the wind to blow last month left places short of renewable power, whilst insufficient water hit some hydro-energy supplies on both sides of the Atlantic. Car industry output is well down, usually attributed to the continuing shortage of microprocessors. Some food crops are wasted for want of people to harvest and pick.
Part of the problem comes from the different behaviour of labour markets post-Covid 19. Many places are short of people prepared to take low-skilled, low-paid jobs in farming and catering. Insufficient people have trained as long-distance lorry drivers, or those with licences have been attracted to do something else or to retire. Some like the easier or more flexible hours of the rapidly expanding online delivery networks. There are new fleets of Amazon vans needing drivers. Covid-19 seems to have led to more people retiring or withdrawing from the Labour market at a time of substantial new job creation to handle the end of lockdowns and social distancing.
Part is a worldwide energy shortage brought on by economic recovery and by government policies relying on intermittent wind, solar and hydro generation while restricting fossil fuel use too much too soon. China's blackouts were partly caused by emission targets restricting coal-fired generation. Europe's gas shortage was partly from a need to burn a lot more gas to make up for an absence of wind. Some is a simple shortage of capacity pending investment in new facilities – as with the scarcity of microprocessors and the shortage of some components and specialist raw materials for various products.
Shortages will end at varied times
It takes longer to build a microchip factory or to put in new generating capacity than it does to train and pay more drivers well. Farming needs to mechanise as well as boost recruitment through pay. In the meantime, winners and losers will be created in business and there will be price volatility and some overall negative stock market effects.
Car makers are suffering a loss of volumes whilst chipmakers are benefiting from a surge in orders and fatter margins. Transport businesses can charge more for shipping and trucking goods with plenty willing to pay, whilst retailers worry about how much of the extra cost they can pass on.
The central banks stick to the line that price spikes in transport costs, gas and electricity will be short lived, as the run up in lumber and iron-ore prices were. They will need to keep their eyes on wages. The rapid escalation of wages for a range of low paid jobs from farming to catering could start a wage/ price spiral which made inflation more persistent.
Governments for the time being in the US and elsewhere will be supportive of better pay for the low paid. They will also need to assist business in delivering productivity gains from better training and more machine and digital power to support staff to make the pay rises affordable without too much inflation. The arguments ahead will rest on how many shortages there are, how much prices go up to tackle them, how persistent wage inflation becomes and whether there is an investment and productivity breakthrough.
Meanwhile, workforces with more bargaining power are still seeking to define a radical shift in the balance between working at home and working in the office. Markets will continue to worry about the withdrawal of stimulus as central banks move to cut support whilst still claiming there is no long-term inflation problem.
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A world struggling with shortages
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