Philip Blenkinsop

BRUSSELS (Reuters), – The global bottlenecks in supply chains are the result of a large demand spike, not fundamental problems in the supply system, according to the WTO’s chief economic economist. He said Wednesday in support of the views of central banks, that these phenomena are temporary.

G20 leaders were expected to meet this week in Italy to talk about supply chain issues and shortages. Robert Koopman however stated that it was not the focus of policies to solve supply chain challenges.

Koopman stated that demand was the true issue and is what drives this perception of shortages.

“It is part of the price of quick recovery.”

In advanced countries, consumer spending has risen, thanks to fiscal and monetary support. The shift was more due to the pandemic, which shifted towards at-home offices, other goods, like vacations or restaurants, than to products from services.

Wholesalers and retailers were also inspired by fears of supply disruptions future, to create inventories.

Koopman explained that demand has grown past the point at which the supply chain could provide the goods.

Automobile industry has been struggling. Koopman stated that they made a mistake in sharply decreasing orders during the pandemic. The subsequent demand was far greater than expected. The chipmakers had since shifted their focus to mobile and laptop producers as the demand for these products was high throughout the pandemic.

Although the International Monetary Fund has reduced its global growth forecast this year partly because of such disruptions it remains strong at 5.9% and 5.2% respectively for advanced economies.

Koopman reported that the global production overall was strong, and both air freight and sea cargo volumes are at all-time records. Container bottlenecks in the U.S. port were caused by a lack of capacity for trucking or rail operators, who are unable to absorb this surge in demand.

Physical capital was intact, as well as most of the labour, and supply chains must continue to work, even though they are struggling right now.

“My prediction is that after the New Year, we will see things slow down,” Koopman said. Koopman suggested that this could depend on the stimulus programs in other countries.