Over the past year, global economies went from a slow expansion at the beginning of 2020, to an abrupt halt with the onset of the pandemic in March 2020. Supply chain bottlenecks have become rampant as increasing demand has evolved from a slowly recovering global economy.
Historically, rising producer prices have been a predecessor to consumer inflation when manufacturers and distributors pass along the higher cost of materials and labor to consumers in the form of higher retail prices.
A lack of critical components for everything from automobiles to cellular phones brought about production shortages that led to decreases in supply simultaneously as demand fell across the globe. As demand has begun to rekindle, shuttered factories and supply chains have not been able to keep up with rising demand, resulting in order backlogs and higher prices.
Some economists believe that current inflationary pressures may be temporary until production ramps up to meet current demand, while others believe that higher prices have become permanent for many products in order to maintain delicate margins.
Source: Bureau of Economic Analysis
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