Global industrial capacity tightness to take time to relieve

Recovering consumer demand has clashed with supply constraints, causing inventories relative to demand to fall in several industries, such as autos, electronics, machinery, and wood. However, the latest data to June indicates inventory tightness in several sectors may be starting to ease.

What you will learn:

• Supply chain disruptions across most sectors should begin to unwind from H2 2021, as the reopening of consumer services and diminishing fiscal support lead to a moderation in goods demand, whilst easing material shortages allow manufacturers to ramp up production.
• However, this moderation in disruption will be gradual, and we expect capacity to remain tight and price pressures to stay firm for the rest of this year. Other sector-specific supply chain disruptions are likely to be longer lasting – notably the semiconductor shortage in the auto industry.
• Consistent with historical experience, we also expect most of the temporary price increases in strained goods to reverse, at least partially.