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As the world continues to bounce back from the pandemic amid heavy inflationary pressures, the story of the economic recovery has been underscored by significant materials and labor supply shortages. However, according to a report released by Bank of America Global Research (BAC) the peak for these shortages may have already passed.
“The BofA Predictive Analytics team’s language analysis suggests that news stories on shortages in key categories including autos and electronics had peaked back in April/May,” the report reads. “The scarcity of many things [in the] housing [sector]—from homes for sale to gas ranges—has gotten lots of press but here too, news mentions have fallen from peak, even outside of shifting lumber dynamics.”
BofA Predictive Analytics used alternative data such as comparing job listings in states that ended additional federal unemployment benefits early versus those that did not, as well as the number of mentions of shortages in news stories covering several major industries.
The report cited various factors including rapid GDP growth, pandemic-related disruptions to factories, shifts in the housing market, difficulties returning to work, and even the winter storm in Texas as being reasons for the shortages across broad swaths in the economy seen in the past few quarters. Prices in markets ranging from used cars to building materials have all seen outsized gains from historical averages that persist to this day as a result of supply and demand shocks.
“But looking at [alternative] data as well as macro data suggests that these shortages may be easing just as demand for goods slows somewhat,” the report reads.
Aggregated BofA credit and debit card spending data demonstrated this slow in demand for durable goods since spring of 2021, though demand still remains up substantially from 2019 levels. The story does not remain the same for the demand for services, however.
“Meanwhile, demand for services including lodging, restaurants and airline tickets shows a consistent grind higher and is ahead of Spring 2021 growth levels, according to BAC card data,” the report added.
As for labor shortages, the report conceded that it may still be “premature to make major conclusions” regarding the broader trends of the labor market, but found that job listings fell more in June in states that had already cut expanded unemployment benefits, especially in the hospitality space. This suggests that job positions are being filled and people may be returning to work, to a certain extent. BofA expects the shortages to ease even more in September as expanded benefits expire in all states.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV
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