Profits Come Before Growth in a Post-Pandemic Economy
Companies traumatized by the recession might just raise prices instead of supply as demand recovers. That will slow recovery, but only temporarily.
It only gets better for homebuilders.
Photographer: Bloomberg
It should be a great year for economic growth. The mass distribution of vaccines combined with multiple rounds of fiscal stimulus and pent-up demand for in-person activity provide plenty of reason for optimism in 2021. But if you're looking for a potential stumbling block for the economy, consider the container shipping market, where prices have surged in response to rising U.S. consumer demand for imported goods.
Demand for goods has gone up during the pandemic as consumers spend money on physical items rather than activities like travel and dining, leaving the container shipping market supply-constrained and unable to keep up with demand. And while ordinarily the response to rising demand would be to increase supply accordingly, the dynamics are different in a consolidated industry where a handful of players control how much supply to produce — as now exists in the container shipping market.