Supply Bottlenecks: Where, Why, How Much, and What Next?

51 Pages Posted: 30 Mar 2022

See all articles by Oya Celasun

Oya Celasun

International Monetary Fund (IMF) - Research Department

Niels-Jakob Hansen

International Monetary Fund (IMF)

Aiko Mineshima

International Monetary Fund (IMF)

Mariano Spector

International Monetary Fund (IMF)

Jing Zhou

International Monetary Fund (IMF)

Date Written: February 1, 2022

Abstract

Supply constraints hurt the economic recovery and boosted inflation in 2021. We find that in the euro area, manufacturing output and GDP would have been about 6 and 2 percent higher, respectively, and half of the rise in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks. Globally, shutdowns can explain up to 40 percent of the supply shocks. Sectors that are more reliant on differentiated inputs—such as autos—are harder hit. Late last year industry experts expected supply shortages for autos to largely dissipate by mid-2022 and broader bottlenecks by end-2022, but given the Omicron wave, disruptions will last for longer, possibly into 2023. With supply constraints adding to price pressures, the challenge for policymakers is to support recovery without allowing high inflation to become entrenched.

Keywords: Output, Inflation, Manufacturing, Supply Constraints, PPI inflation, producer price inflation, supply-shock contribution, chip shortage, industry expert, Supply shocks, Inflation, Manufacturing, Producer price indexes, Labor shortages, Global

JEL Classification: E23, E30, Q11, E31, L60, J20

Suggested Citation

Celasun, Oya and Hansen, Niels-Jakob and Mineshima, Aiko and Spector, Mariano and Zhou, Jing, Supply Bottlenecks: Where, Why, How Much, and What Next? (February 1, 2022). IMF Working Paper No. 2022/031, Available at SSRN: https://ssrn.com/abstract=4065451

Oya Celasun (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Niels-Jakob Hansen

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Aiko Mineshima

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mariano Spector

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jing Zhou

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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