Overview*
Strong consumption and investment, enabled by economic reopenings and solid corporate and household balance sheets, are bolstering aggregate demand to a degree that has surprised many, be they executives, economists, policy makers or Wall Street analysts. It is a phenomenon that is likely to persist in the months and quarters ahead, especially in those countries that are able to contain Covid-19 infections, vaccinate many citizens and guard against new variants of the virus.
The supply side is much more of challenge. Indeed, it is quite a mess. Bottlenecks and other rigidities are disrupting many supply chains. Shipping, including the availability of containers, has become much harder to secure. Covid outbreaks in certain countries that are embedded in global supply chains — such as Bangladesh, India and Vietnam — and geopolitical uncertainties, including periodic tensions between China and the U.S. and Europe, add to the headaches facing those not just trying to get raw materials to their factories in a timely and cost-effective manner but also to meet seasonal demand for their final products.