Fear of shortages

The crisis resulting from the SARS-CoV-2 pandemic is unprecedented and its socio-economic consequences are expected to surface in the medium term. In the meantime, the long-awaited economic recovery is facing an unexpected spectre: inflation.

The emergence of the new virus in the industrial city of Wuhan will soon mark its second anniversary and on 11 March it will be two years since the World Health Organisation (WHO) declared it a pandemic. Since then, both industrialised and emerging countries have taken various measures to control the spread of the pathogen, some of them drastic, such as mandatory containment and the closure of non-essential business and industrial activity.

In this way, value chains, production chains and distribution chains have been disrupted, not only locally and nationally but also to the detriment of international movement.

There is a keen struggle to be the first to obtain primary supplies. In recent months, with the progress of the anti-COVID vaccination in different countries, the feeling of control of the virus has given confidence to the people who have returned to an increasing demand for a series of goods, products and services - at an accelerated rate - in relation to the rhythm of supply, which has caused shortages and a consequent increase in prices. In other words, an increase in inflation.

Faced with Black Friday, transnationals such as the Swedish IKEA are redistributing stocks from one shop to another, while some of their star products appear to be out of stock; likewise, several dumbbells are missing from the shelves of Decathlon and in many department stores there is furniture, cosmetics or digital products unavailable or with delivery orders for more than a month.

In some countries, such as the United Kingdom, which has also been hit by Brexit, there is open talk of shortages, the shelves of several supermarkets have no chicken, meat or beer, let alone milk, and the lack of petrol at service stations has made its citizens nervous.

Nick Andrews, analyst at Capital Economics, anticipates that the British economy will enter into recession next year, the expected recovery this 2021 of a GDP close to 7% estimated by the International Monetary Fund (IMF) will be diluted in 2021 if the British economy fails to recover the missing jobs and effectively restore the supply of inputs.

Nor is the US economy spared: the starting point is the cargo ships and containers that the WTO explains that it is not so easy to recover the normal supply rhythm before the pandemic, so there are several problems to correct, starting with supply returning to its production peaks, demand managing to stabilise and distribution channels once again functioning to the full.

The disruption in the economy has been in all areas, affecting the variables with different magnitudes: last year it contracted demand, but, on the other hand, it increased in a historic way the savings contained in households, fundamentally in the highest income brackets.

According to the rating agency Moody's, the total amount saved in the world in 2020 is equivalent to 6% of global GDP, the highest rate in history at 5.4 trillion dollars, 16.66% more than in the previous year.

There are four countries with the largest accumulation of household savings: the United States with 12% of GDP, the United Kingdom with 10% of GDP, Canada with 9.5% of GDP and Spain with 8% of GDP.

This is not a homogeneous saving for all households, fundamentally there is a greater propensity for higher incomes while other households affected by closures, loss of employment or income have dipped into their savings. What it does seem is that in all cases demand has contracted and consumption has been more selective.

In this train that is the economy, the emergence of the pandemic caused a fall in consumption, contraction in demand, a halt in supply, a historic increase in savings and a breakdown in supply and production chains.

The global consultancy Bain & Company acknowledges that the suspension of several operations last year caused several chains to break, affecting both retail companies and major retailers. The reality, it points out, is that the pandemic has exposed a multitude of flaws in production, operational and supply chains that companies have had to correct on the fly, especially in an unprecedented way as soon as the demand for goods has abruptly reactivated.

According to consultant Stephan Zech, production chains and operations will never be the same as they were before the pandemic, because it is no longer a question of costs, but of getting the inputs for processing and distribution in time.