Supply Bottlenecks: Where, Why, How Much, and What Next?

By Oya Celasun, Niels-Jakob H Hansen, Aiko Mineshima, Mariano Spector, Jing Zhou

February 17, 2022

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Format: Chicago

Oya Celasun, Niels-Jakob H Hansen, Aiko Mineshima, Mariano Spector, and Jing Zhou. Supply Bottlenecks: Where, Why, How Much, and What Next?, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Supply constraints hurt the economic recovery and boosted inflation in 2021. We find that in the euro area, manufacturing output and GDP would have been about 6 and 2 percent higher, respectively, and half of the rise in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks. Globally, shutdowns can explain up to 40 percent of the supply shocks. Sectors that are more reliant on differentiated inputs—such as autos—are harder hit. Late last year industry experts expected supply shortages for autos to largely dissipate by mid-2022 and broader bottlenecks by end-2022, but given the Omicron wave, disruptions will last for longer, possibly into 2023. With supply constraints adding to price pressures, the challenge for policymakers is to support recovery without allowing high inflation to become entrenched.

Subject: Economic sectors, Economic theory, Inflation, Labor, Labor shortages, Manufacturing, Prices, Producer price indexes, Supply shocks

Keywords: Chip shortage, Global, Industry expert, Inflation, Labor shortages, Manufacturing, Output, PPI inflation, Producer price indexes, Producer price inflation, Supply Constraints, Supply shocks, Supply-shock contribution

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/031
Stock No:

WPIEA2022031
ISBN:

9798400202476
ISSN:

1018-5941

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