Containers loaded on a ship
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The Supply Chain Shortages Might Get Worse Before Getting Better

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Oct. 22 2021, Published 7:15 a.m. ET

The global supply chain shortages have crippled industries for the past six months, and the situation doesn't look like it will improve soon. If anything, it could get worse for some products. Many people are wondering when the supply chain shortages will end.

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The supply chain problems are also slowing global economic recovery, leading to inflationary pressures that might force central banks to pull the plug on their accommodative monetary policies. Central banks in New Zealand and South Korea have raised rates, and the U.S. Fed is on track to begin tapering later this year.

Why is there a supply chain shortage?

There's been a perfect storm in global supply chains. Demand has picked up globally and many companies are restocking after eating into their inventories in 2020 amid the pandemic, but the supply of many goods has not kept up. COVID-19 outbreaks have also taken a toll on global supply chains.

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Furthermore, the last few months have also been a logistics nightmare. There's been a shortage of shipping containers compounded by jammed ports and a shortage of drivers to transport goods inland. The hoarding of some products isn't helping, either.

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When will the supply chain problems end?

The supply chain problems might get a bit worse before they get better. The holiday season is approaching and demand is expected to pick up, further pressuring global supply chains.

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However, things should improve in 2022. Demand might taper while supply picks up. The labor shortage situation and other logistics issues are also expected to resolve in 2022.

When will the chip shortage end?

The global chip shortage is possibly among the most crippling aspects of the supply chain problems. The global automotive industry is expected to lose billions of dollars in production in 2021 due to the chip shortage.

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Most companies had expected the chip situation to get better in the back half of 2021, but now it seems the shortage could extend into 2023, according to Intel. “We’re in the worst of it now; every quarter next year, we’ll get incrementally better, but they’re not going to have supply-demand balance until 2023,” said Intel CEO Pat Gelsinger to CNBC.

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AMD still believes that things will look up in the second half of 2022. Chipmakers have scaled up investments in new chip plants, which are set to start coming online in 2022.

All said, expect the supply chain problems to get worse over the next couple of months. Don't be surprised if you can’t find your favorite Christmas tree or the right tires for your car when you go shopping.

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