Current News

/

ArcaMax

Analysis: Ahead of holidays, Biden tries to untangle supply chain mess

Chris Megerian and Don Lee, Los Angeles Times on

Published in News & Features

However, Rosner acknowledged that a difficult holiday season could add to “a frustrating autumn of discontent,” including controversies over the withdrawal from Afghanistan and unhappiness over the lingering pandemic.

The current gridlock reflects a confluence of challenges. Over the years, supply chains have become increasingly vulnerable to disruption as companies have narrowed and accelerated the time for sourcing and transporting goods.

Then the pandemic upended the global economy, plunging the world into a recession and leading to a burst of demand for certain goods.

Jeffrey Sonnenfeld, a Yale University management professor who regularly meets with and surveys top corporate executives, said Biden’s announcement will be welcomed in corner offices. Until recently, he said, major retailers and transportation companies believed they could handle supply chain problems on their own.

“It’s only now that the private sector has conceded defeat. They’re asking for help and getting it. It’s a big breakthrough, symbolic and in substantive ways,” he said.

One of the biggest economic threats is that supply chain bottlenecks and various shortages are sparking higher inflation. The government said Wednesday that inflation rose last month, with consumers paying 5.4% more for goods and services compared with a year ago, the highest rate in more than a decade.

White House economists and policymakers at the Federal Reserve have viewed the recent surge in consumer prices as temporary, but inflation has been running well above the Fed’s comfortable level now since spring. Persistently higher inflation could cause complications for the Fed’s interest rate policies, and it could influence consumer spending and wage growth. Already, analysts have sharply marked down economic growth for the second half of this year, and 2022 is likely to bring slower growth.

 

The supply chain snarl has presented Biden with another opportunity to push his infrastructure plans, which are stalled on Capitol Hill as Democrats sort out how much money they want to spend on expanded safety net programs. The legislation, which passed the Senate but is awaiting a vote in the House, includes $17 billion to modernize and expand port facilities.

Biden described the legislation as “the biggest investments in ports in our history.”

“We need to think big and bold,” he said Wednesday.

But even if the measure makes it to the president’s desk for his signature, the full benefits probably will be years away.

“In the longer run, there are infrastructure investments that could expand system capacity, but that’s not a quick fix,” said Phil Levy, chief economist at Flexport, a San Francisco-based freight shipment and customs brokerage company.

©2021 Los Angeles Times. Visit at latimes.com. Distributed by Tribune Content Agency, LLC.