Supply-Side Shocks

As a mere humble observer of passing macro events, rather than a model builder, I have been noticing a series of unexpected supply-side shocks coming in one business after another. Unlike the technology and globalisation changes of the previous two decades, these are leading to one set of price increases after another. All of these rises can be explained, for a while, as idiosyncratic, isolated supply-chain issues against a deflationary backdrop. At some point, though, you have to wonder if there is something wrong with our bloody ships. Within the past month, for example, the cost of adjusting property losses for US insurers has roughly doubled…On top of that, the cost of used cars is going up as people need to replace ones destroyed in one hurricane or another…Then there is the increase in dry cargo rates, roughly measured by the Baltic Dry index…Then we have inflation in the price of the technologies of the future, such as electric cars…Then there is the big daddy of all supply-side constraints: skilled labour.