Trade chiefs from the developed world’s economic powers gathered on Friday have few options at their fingertips for a quick fix to supply chain problems that are driving inflation up and holding back growth, a problem according to experts at the commerce arises from market forces beyond their reach.

G7 trade ministers meeting in London could call for redoubled efforts to clear backlogs at container ports and other transport bottlenecks, more infrastructure improvements to speed time to market of goods and to diversify the sources of key components such as semiconductors, including more domestic production.

But these are all long term solutions. The market forces that created excess demand for goods may already be well on their way to correcting the problem.

“These officials have very few arrows in their quivers to solve this problem,” said Harry Broadman, managing director of the Berkley Research Group and former head of US commerce. “This is ultimately driven by consumer demand. “

With demand and supply out of sync and logistics struggling to catch up, it could take up to six months for many commodity shortages to ease, he said, much of the change. driven by market forces and private sector firms closing the gap.

US President Joe Biden announced new round-the-clock port operations in Los Angeles last week and called on private sector logistics companies to “step up” with big retailers such as Target and Wal-Mart to expedite cargo. on the shelves in time for the Christmas holidays. But logistics experts, economists and unions have warned that the efforts may be just incremental steps to clear the backlog.

Republican U.S. lawmakers, seizing bottlenecks for political gain, urged Biden in letter to “tackle the global supply chain and port crisis before Congress even considers legislation additional on social spending and taxation “.

But meeting some of the supply chain’s most critical needs will take time, said William Reinsch, trade expert at the Center for Strategic and International Studies and former Commerce Department export manager.

Adding domestic production capacity for more semiconductors to reduce dependence on a handful of Asian countries will take years and upgrading port infrastructure to increase efficiency and cost. debit is also a long-term endeavor, he said.

Director of the European Department of the International Monetary Fund, Alfred Kammer, said policymakers could take steps to try to reduce bottlenecks in transport, but strengthening supply chains would require investments in infrastructure and diversification of sources of key components. He said the current inflationary effects of supply chain disruptions and energy shortages are expected to fade in Europe next year.

“It will be a very complex problem. The market will deal with part of it, but government policy can also support adjustment, especially on the infrastructure side.”

Too much money

Much of the current problem is a mismatch between the strong pent-up demand for goods fueled by coronavirus aid checks and the savings accumulated during pandemic lockdowns versus supplies constrained by production shutdowns, dwindling inventories and cost savings. labor shortages.

US Treasury Secretary Janet Yellen described the phenomenon as a “very, very unusual shock” that diverted spending on services such as travel, accommodation and restaurants.

“Instead, we’ve gobbled up goods and commodities like we’ve never seen before,” Yellen told MSNBC in an interview that aired Wednesday.

UK Finance Minister Rishi Sunak last week called on G7 governments to work together to tackle supply chain disruptions.

But the consumer boom that has pushed US consumer spending on durable goods 25% above trend this year will not last and will likely be replaced by below-normal demand in 2022, said Paul Donovan, Chief Economist at UBS, in a note to clients. This will slow GDP growth and curb inflation.

“Once pent-up demand is satisfied, there is no more need to spend. The person who bought a new washing machine this year is not rushing to buy another new washing machine next year,” wrote Donovan.

Peak crisis?

Jefferies stock analysts said the supply chain crisis may have already reached its peak with the mid-October shipping deadline being passed for holiday items, freeing up capacity for the “basic” shipment of machinery, automotive products and furnishings.

“There are signs that we have passed the peak and analysts at Jefferies expect significant improvement by the second half” of 2022, the company said in a research report.

Data from Tradeshift, a digital platform that facilitates and processes business-to-business business transactions, indicates that demand and supply equalization is already underway.

The group’s third-quarter order volume index fell 24 points from the second quarter to 85, well below the 100-point score that equals the trend forecast before the pandemic.

“Buyers are starting to question whether it is wise to place new orders in a system that is collapsing under a huge backlog,” Tradeshift chief executive Christian Lanng said in a statement. “The longer this situation persists, the more likely it is that we will see a more protracted reversal by 2022.”