Supply Headwinds Continue

Supply Headwinds Continue

October 13, 2021 Off By Chris

You’ve likely heard, we have supply chain problems and it is affecting everyone. Yesterday, Costar put together a nice article on how these supply chains are going to affect the Fourth Quarter.

The Pandemic is to blame for all of these supply chain issues. We are seeing issues with Southeast Asia and South America, where vaccine availability is limited as well as domestic labor shortages, we are going to continue to struggle with this in the future months.

Per the Costar article, here is a summary of what they pointed out:

  • Low Labor Force Participation Continues to Slow Job Recovery
  • Auto Sales Drop
  • US Trade Deficit Widens

The supply headwinds will continue to push on the economy expanding at the rate we all want to see. There are almost 11 million open positions that are unfilled in our economy which will certainly present a roadblock to a full labor market recovery.

“The effects of supply chain disruptions on production are constraining consumers’ ability to spend.” According to the Bureau of Economic Analysis, auto sales are at their lowest levels since 2011 when households were recovering from the Great Recession. The result is low inventories and higher prices for consumers on both new and used vehicles. Furthermore, auto sales account for about 20% of all retail sales so due to the shortages we expect to see a drop in the overall retail sales.

With the issues that we are all seeing on labor and supply chain disruptions, many firms are warning consumers that they will see shortages this holiday season. Not only does it create an issue for gift giving, it creates a drop in income for the companies that rely on big holiday seasons to stay healthy.

Given the above, we will continue to watch as the balance of the year unfolds. We are also reports on inflation spiraling out of control and the consumer price index is set to be released next week which we all expect to see it moving up.

With regards to the real estate market, offices are still not at capacity and with all these vaccine mandates I’m hearing several of my clients express concern over employee shortages. While I’m seeing some ramblings of firms taking new space for longer terms, it is still spotty. Sublease space still gives a company an option to save money. I believe the markets will ultimately return and we’ll see employees come back but it is all being prolonged with the politics being played out in California.

The full article is below. I hope to share one more economic report in the upcoming days.