Peak demand is behind perceived shortage, says WTO economist

Global bottlenecks are the result of a huge spike in demand and not fundamental problems in the supply chain, said World Trade Organization (WTO) chief economist Robert Koopman, a view that supports that of the central banks that it is a transitory phenomenon.

G20 leaders are expected to discuss supply chain bottlenecks and apparent shortages when they meet in Italy this week, but Koopman He said policies to address supply chain difficulties were ignoring the main problem.

“I think the real issue here is demand, and demand is driving what this perception of shortage is even though it’s not clear, to me, that supplies are lower than in 2019, except for things like cars. It’s part of the cost of fast recovery”He added.

Consumer spending in advanced economies has exploded, helped by fiscal and monetary support, and because of the pandemic it shifted more to home offices and other goods from services, such as restaurants or vacations.

Fears of future supply disruptions have also led retailers and wholesalers to accumulate inventories.

“Demand has continued to grow beyond the level that the supply chain could provide”Koopman said.

He noted that in hindsight, automakers had made a mistake by drastically reducing orders during the pandemic, because demand afterward was well above expectations.

Chipmakers have focused on supplying laptop and mobile phone companies, whose demand was high during the pandemic.

The International Monetary Fund (IMF) cut its global growth forecast for this year, in part because of these disruptions, but it remains high, between 5.9% and 5.2% for advanced economies.

Koopman He commented that global production as a whole was strong and that air and ocean freight volumes were at or near their all-time highs.

Physical capital and most of the workforce still exist, so supply chains should continue to function, even if they are struggling now.

“My opinion is that after the New Year we should start to see things slow down. However, that could depend on the stimulus measures of the different countries“, I consider.