The Need for More Resilient Supply Chains
Date Posted: August 22, 2022
Posted In: Discussion,
From Federal Reserve Bank of St. Louis: “How can firms and how can governments internalize uncertainty of a future shock and what can they do today to hedge the risks of something happening in the future?” asks Ana Maria Santacreu, research officer at the Federal Reserve Bank of St. Louis, in her latest discussion about supply chain disruptions and producer price index inflation. Santacreu talks with Maria Hasenstab, media relations coordinator at the St. Louis Fed, about her research on supply chains.
Transcript
Maria Hasenstab: Welcome to the St. Louis Fed’s Timely Topics podcast series where we interview economists about their research. I’m Maria Hasenstab, your host. In this episode, we’ll be discussing supply chain disruptions and inflation with Ana Maria Santacreu, a research officer at the Federal Reserve Bank of St. Louis.
Ana Maria Santacreu: Thanks for having me.
Hasenstab: The COVID-19 pandemic caused supply chain disruptions, and we all know that now. But, remind us what those disruptions looked like at the onset of lockdown in spring 2020, how those disruptions evolved throughout the pandemic, and then, bring us to what those disruptions look like now, our current situation.
Santacreu: Yeah. So, the pandemic has changed the patterns of consumption in a way that we have not seen in previous recessions. So, first, as you were saying, there were lockdowns, and there was fear of contagion. So, people were not going to eat out in restaurants. There was less traveling, and at the same time, governments were giving strong fiscal support to consumers. And, part of those checks were spent on durable consumptions. So, for example, there was work from home, and then, people were buying desks. They were buying chairs to set up their home office. They were buying fitness equipment. They were buying video games. So, what we experienced was a change in the composition of consumption away from services and toward durable goods.
Hasenstab: Yes. People stopped going out to eat, but you’re right. They had to build their home office, and they weren’t going to the gym. So, they might have bought a treadmill or an exercise bike.
Santacreu: Exactly, and that’s something that we haven’t experienced in previous recessions. So, during a typical recession, the consumption of services doesn’t move mostly, but the consumption of durable goods declines and then it’s starts recovering until it gets back to the initial level. What we saw in the current pandemic is that there was a huge drop in the consumption of services. As you were saying, people were not going out, and it hasn’t recovered yet. Whereas, the consumption of durable goods declined at the beginning of the pandemic, like in a typical recession, but then, it started increasing dramatically. And today, consumption of durable goods is 40% above of what it was in February of 2020.