It was all going so well. Successful vaccination programs were driving the post-pandemic recovery of the global economy, stock markets were back at record highs, and prices were rising just enough to make deflation fears a thing of the past.
But a supply crunch that initially put a question mark over the availability of luxury cars or whether there would be enough PlayStations under our Christmas trees is instead morphing into a full-blown crisis featuring a shortage of energy, labor, and transport from Liverpool to Los Angeles, and from Qingdao to Queensland.
All the problems are in one way or another tangled up in the surge of post-pandemic consumer demand, but taken together they threaten what one leading economist calls a “stagflationary wind” that could blow the global economy off course. Mohamed El-Erian, an adviser to the insurance giant Allianz and president of Queens’ College,
Cambridge, says this week’s surprise fall in factory output in China was a clear warning that the world economy could slump while prices were still rising quickly, a doomsday double whammy that almost sank the UK in the 1970s.
“The supply chain problems are much more persistent than most policymakers expected, although companies are less surprised,” he said. “Governments are having to rethink quickly because the three elements – supply side, transport, labor – are coming together to blow a stagflationary wind through the global economy.” READ MORE
