Component parts are seeing manufacturing delays from Chinese producers, backing up 
production line orders for hot commodity items amid the COVID-19 pandemic. (RVezy photo)

Component parts are seeing manufacturing delays from Chinese producers, backing up production line orders for hot commodity items amid the COVID-19 pandemic. (RVezy photo)

COLUMN: Pandemic short circuits economic supply and demand

What do trailers, ATVs and ketchup packs have in common?

Supply and demand – it is what makes our economic world turn around.

Capitalists love it, communists hate it and socialists want to control it.

But right now, the coronavirus pandemic has changed those supply and demand patterns in response to changing consumer buying habits, again caused by the pandemic, and it is causing headaches for many manufacturers, retailers and consumers.

Want to be a new trailer right now? Be prepared to wait three to six months and it may show up.

Other recreation pursuits — boats, ATVs, bicycles, exercise equipment — be prepared to wait. The component parts are seeing manufacturing delays from Chinese producers, backing up production line orders.

Just last week, I was told there is now a shortage of ketchup packets across North America because of the upswing in demand for take-out food, which ketchup producers like Heinz are having trouble keeping up with.

There is also a global computer chip shortage, caused by the surge in demand for home tech products as millions of people have moved to work from home as the pandemic set in. That has a ripple affect on production of other computerization products such as increasingly dependent automobiles.

“The economy is a fine web where everything is matched together and that got torn apart by the pandemic,” said Jason Furman, a Harvard professor and former chief economist for U.S. President Barack Obama’s administration in a story posted to the Politico website. “We’re just hoping it all comes back together.”

UBC Okanagan economics professor Ross Hickey thinks that hope is well-founded, that the flow of goods and services will return as before.

He cites the trailer shortfall as a reflection of consumers unable to travel internationally as we once did, unable to spend our leisure time going to concerts, live theatre, movie theatres or our other traditional entertainment options. But for many of us, the money is still there to spend so other options are pursued.

One reason Hickey feels economic norms will return is despite the variety of current manufactured-product shortages, the prices for consumers for those products has not changed radically, with some exceptions such as the cost of lumber.

Typically, he says, high demand on a product will put in short supply, driving up the price. But that is not happening in a widespread way right now, which Hickey suggests manufacturers envision a return to norms as the coronavirus pandemic begins to subside with vaccination efforts.

He also cites how the economic slowdown in part is also due to an economic philosophy change in how companies stockpile large scale inventory, which they basically don’t.

“There has been a dramatic change over the past 20 years with inventory management in retail and production, where now you order what you need when you need it which means inventories are not built up as was done historically in the past.

“So when you see that ship stuck in the Suez Canal, the goods on that ship and the others trying to get through that shipping route are not building up inventory somewhere… those things will be needed right away.”

Based on the example of how Canada is dependent on outside manufacturers for vaccine supply, some are saying we are paying the price now for starting to move 30 years ago to relying on off-shore manufacturing rather than producing goods in our own country because it is a cheaper option.

In the U.S., it can be argued the economy has evolved from manufacturing to generating income from consumer services and making money on money, which has led to the rich getting richer, a dysfunctional, over-hyped and unrealistic economy representation stock market, and the loss of stable, good-paying manufacturing jobs.

Hickey says that is a complicated concept to unravel, and when governments intervene in the business world it tends to produce inefficient results.

“It is easy for things to go wrong when the government tries to pick winners, rather than just creating a tax code environment and labour pool for other bidders to create economic opportunity,” he said.

So while we all hear the optimism about an eventual return to a post-pandemic normal, one begins to think it might not be quite that simple or predictable.

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