Supply Chain Strains to Extend Into Mid-2022, Economists Say

Inflation predicted at 5.25% in December, a Wall Street Journal survey found. 

October 18, 2021

Shipments Being Stacked Up and Delayed

NEW YORK—Economists surveyed by the Wall Street Journal expect supply chain bottlenecks and elevated inflation to persist well into next year and continue to threaten the growth of the U.S. economy. Concerns about COVID-19 as a risk to growth, however, have waned.

In a survey of 67 economists conducted October 8-12, 2021, 33.3% of respondents said supply-chain disruption will largely recede in the second quarter of 2022, while 26.7% peg the third quarter and 18.3% of respondents predict the third quarter of 2022.

On average, the economists surveyed estimate December consumer-price inflation at 5.25%. By next June, consumer-price inflation is expected to drop to 3.4% and to 2.6% by the end of 2022. The Journal notes that inflation stood at 1.8% in the decade before the COVID-19 pandemic.

Demand for goods remains high, while labor is in short supply, putting extra strain on the supply chain. Meanwhile, consumers are paying higher prices for goods and services, crimping their spending power.

“Consumer spending, and by extension GDP growth, is being limited by high rates of inflation eroding the real purchasing power of consumers,” Michael Brown, principal U.S. economist at Visa, told the Journal.

The Conference Board on October 13 released its outlook for the U.S. economy, forecasting that growth in gross domestic product would slow to a 3.5% annualized rate in the third quarter, down from 6.7% in the second quarter.

“Bottlenecks in global supply chains made it difficult for businesses to keep up with elevated demand for many goods earlier this year, resulting in a sharp contraction in private inventories,” the Conference Board noted. “We expect this trend to reverse over the coming months as the December holiday period approaches, and forecast a rebound in private inventories. However, the pace of restocking will be slower than previously anticipated as the Delta variant has hindered manufacturing and shipping activity in key economies around the world.”