US suffers from wide-scale shortages and supply chain bottlenecks

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The world economy still cannot recover from past widespread turmoils and shutdowns caused by the pandemic. For example, the US still struggles with some of the problems that are preventing the US economy from a robust recovery. Serious supply chain bottlenecks are among the main issues. It means that many goods simply cannot reach their customers.

Along with the COVID-19 outspread, hurricanes devastate the country and its economy. Some of the US oil refineries had to suspend their work because of the disastrous cataclysms. As a consequence, the supply of plastics and other key materials for many manufacturing plants was mercilessly disrupted.

Before the pandemic, the purchase of the components needed for the production of certain goods was only one click away. Some deliveries, for example, parts for an assembly line in Texas, a local manufacturer could receive without any difficulties and it took only several days (sometimes a few weeks). Today, businesses can only dream of such delivery timings. Sometimes waiting for the ordered goods stretches for several months, and, even more, they may not be needed anymore upon receiving.

The US is suffering from a severe shortage of materials necessary for production, such as metal, plastic, and wood. Even bottles for liquor are in acute shortage. Many US companies experience prolonged depression and have not found a way to come out of it yet. For example, a company cannot deliver a whole batch of tents to their customers because the aluminum tubes for the frames and zippers have not been delivered to the manufacturer yet. The worst part is that nobody knows when all these parts will finally be delivered to the manufacturer.

A massive shortage has struck virtually every production area of the US from bulldozers to bourbon. Recently, industrial giant Caterpillar said back in July that the company's profits will fall markedly in the current quarter, all because of rising prices for hardly available goods. In response to the difficulties, management is going to take a risk and use more affordable, unconventional sources in its production, which could replace plastic resin and semiconductors.

Recently, Lawson Whiting, CEO of the liquor manufacturer Brown-Forman, told the investors that severe shortages of basic packaging materials (mostly glass) have created serious problems for production at well-known brands such as Jack Daniel's and Woodford Reserve.

The US companies are trying to cope with the occurred problems the best way they can. For example, some industries have decided to start building new production plants. This includes semiconductor manufacturers, which are currently under a lot of pressure because they cannot fully meet the growing demand for microchips, which are essential for vehicles and electronics production.

Meanwhile, the methods to organize and maintain the supply chains and control their prices are no longer working. Disrupted supply chains have created an almost uncontrollable flow of manufacturers who, for well-known reasons, put in all their effort to deliver the goods to customers on time. Many companies simultaneously want to use the services of cargo transportation. As a result, containers, ships, and trucks were barely unavailable to most companies, consequently, the cost of their services increased sharply.

David Reilly, CEO of United Solutions plastic items producer, said that resins of some types went up by 100% last year. Such a staggering increase in the price for an important manufacturing product is a huge headache for the entire company. When the prices of main raw materials skyrocketed, Reilly had aimed at the markets of other countries, particularly China. Today, it is impossible, because shipping prices have become so high that the manufacturer's own end product will have to be offered to customers for an unbelievably huge price. And that already sounds like big losses.

Obviously, with the acute policy problems, there are no definite statements from the Federal Reserve. The tapering timings are still unknown as well as when the policy interest rate will rise. The problems in the US are only getting bigger. In addition to the rising wages due to labor shortages, there are extremely high delivery costs and widespread shortages of goods. The inflation rate, which is poorly controlled, is soaring and has already reached its highest for the past 13 years.

The material has been provided by InstaForex Company - www.instaforex.com

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