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Supply Chain Woes
Last Saturday, I bought a new car: a fuel-efficient Toyota Corolla Hybrid.
I started the process more than two months ago, putting a deposit down and waiting as my car traveled from Japan, to Portland, Oregon, to Tennessee. Car lots were practically empty when I began my search. Demand for new cars is up, particularly for hybrid vehicles because of today’s gas prices. Supply is down. I had to wait.
But my patience, it seems, was rewarded: The dealer only charged $1,000 over the Manufacturer Suggested Retail Price (MSRP), and interest rates on new car loans remain low. Many used cars are more expensive than new ones these days, and loans on used cars tend to carry a higher rate.
But some supply chain problems can’t be so easily addressed. As I was picking up my new car, parents across the country were facing a more dire shortage: baby formula. Empty shelves provide evidence of a supply chain complicated by trade restrictions, a market duopoly, and the recall of formula produced by one of these suppliers. The formula manufacturer Abbott Laboratories had to shut down one of the few production facilities in the nation.
Formula is also impacted by the same supply chain issues we’ve been experiencing since the pandemic hit the U.S. economy. In an interactive graph published in December 2021, The New York Times laid out how the complex supply chain crisis unfolded, predicting that these issues will likely “last for many more months — if not years.”
In Bank Director’s 2022 Bank M&A Survey, conducted last September, bank leaders indicated that they weren’t too worried about the labor shortages and supply chain issues experienced by their business customers at that time. Further, the majority expected modest growth for the U.S. economy.
Now, the word “recession” seems to be on everyone’s lips. This week, former Federal Reserve Chair Ben Bernanke predicted stagflation, a period of slow growth and high inflation. And Lloyd Blankfein, the senior chairman of Goldman Sachs Group, told CBS’s Face the Nation: “If I were running a big company, I would be very prepared for [a recession] … If I was a consumer, I’d be prepared for it." That was before this week’s stock market rout.
Of course, predictions are just that: A recession might happen, or it might not. But we’d all do well to prepare.
• Emily McCormick, vice president of research for Bank Director
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