Oh Yea, Supply is a Thing!
We Forgot About One Small Detail...
Throughout the concerns of a recession, we talked about many aspects of the economy that both individuals and businesses were in fear of. Confidence in the market, the ability to actually spend when businesses were shut down, the desire to spend when your job was potentially on the line, and the fact that Americans were starting to save more...leading some to believe the consumer economy was primed for a dip.
These fears were real and warranted. No doubt about it. And the above referenced concerns are sure to continue to be a talking point for months and maybe even years to come. But in the present moment there was one small detail that was almost completely overlooked by economists when talking about getting the economy back open again. Supply is a real part of how we are able to fuel and maintain demand and right now we’re having a major issue on the Supply side.
Demand is Surprisingly There
It appears that as of right now, people are actually willing to go out and spend their money. The fear that they wouldn’t actually wasn’t as impactful as we speculated (whether this creates a bigger issue down the road is yet to be seen). However, workers are having hours cut, small businesses are reducing operating hours, and consumers are being forced to stay on the sideline due to a disruption to the availability of certain supplies necessary to produce the goods that are still in high demand.
I’ll give you a couple of examples. In my small town, the local bike shop is overwhelmed with demand right now. As the nice weather here in Michigan pops its head out for the small window of a Summer we have here, people are flocking to the scenic Macomb Orchard Bike Trails after a 3 month lock-down. People who need repairs and those looking to upgrade their existing bikes are being pushed back weeks due to the fact that they cannot get the required supplies in fast enough from the manufacturer. Because they too had been shut down, preventing them from being prepared for the upcoming busy season.
"The work is there, but the staff is operating at less than full capacity due to the fact that they don’t have the proper tools to complete the job."
For my apparel decorating business, many of our suppliers carry product from manufacturers that come from overseas. The most standard of items are seeing drops in inventory and availability to levels that I’ve not seen in 15 years of the business. With no re-stock dates available, our concern now as a business is not the question of will I have customers, but will I be able to get the necessary goods to fulfill their orders when the existing inventory drys up.
You Can't Have One Without the Other
Supply and Demand go hand in invisible hand. Right now, our fragile economy has the Demand but we need Supply to catch up. Otherwise, small businesses may not be able to hold on and layoffs will sweep through the United States once again.
But by the time that happens, we’ll have another Supply and Demand issue. And that’s the demand for more stimulus funding for individuals and small businesses. Unfortunately though, I think that supply side might already be dried up too.