U.S. Supply-Demand Mismatch Risks Shortages and Higher Prices
Consumers seem willing to spend again, but production is a long way from catching up.
Start it up.
Photographer: Jeff Kowalsky/Bloomberg
New data suggest that the economy has been growing for the past two months, although the distribution of that growth has been uneven. Consumption has been recovering more quickly than production, a divergence that will need to be resolved during the next few months. Some catch-up growth in manufacturing and housing should help offset any speed bumps in consumption that might come about from a second wave of the coronavirus or withdrawal of fiscal support by Congress.
The best encapsulation of this trend might be the advance retail sales and industrial production data released on Tuesday. Retail sales in May significantly outpaced expectations, rising 17.7% from the prior month and down just 6.1% from a year ago. The drivers of the improvement were sales of motor vehicles, furniture and clothing as states began reopening their economies, with consumers perhaps having some pent-up demand after sheltering-in-place for weeks.