From Zero Hedge:
El-Erian Fears ‘Not Transitory’ Stagflation As Maersk Exec Warns Only “Lower Consumer Demand” Will Fix Broken Supply Chains
“We need to work out how we break this vicious circle,” which is leaving shelves empty of goods across the world, said Morten Engelstoft, chief executive of Maersk-owned APM Terminals.
In Engelstoft’s view, the crisis was created by surging demand putting strain on container groups, suppliers and logistics companies as they struggled to deliver goods.
The boss of one of the world’s largest port and terminal operators does have a solution – stop buying so much shit!
“We need lower [consumer demand] growth to give the supply chain time to catch up, or differently spread out growth. Over a long period of time, we will need to recover efficiency.”
As The FT reports, congested ports are being hit by a global shortage of truck drivers and constricted space at warehouses, causing further delays in deliveries disrupted by the Covid-19 crisis.
Brian Sondey, chief executive of Triton International, the world’s largest container leasing company, said container volumes were “too large to clear out during that window”.
“Consensus in the industry is we’re unlikely to see a cleaning up of the situation until deep into next year,” he added.
Mohamed El-Erian also sees these disruptions “will be with us for a while,” prompting producer pries to continue soaring around the world.
Fewer chief executives have confidence that such disruptions are temporary and quickly reversible. This will restrain growth plans despite robust demand, and increase pressure to raise prices to offset higher costs.
Rather than a one-off dynamic, the global economy is experiencing waves of supply disruptions suggesting that longer-term forces are also in play. Yet some policymakers and market participants continue to assert that supply-demand imbalances are transitory, soon to be resolved by market forces.
El-Erian warns that while there are some ‘reversible factors’, supply side troubles could last for one to two years, if not more, which translates into stagflationary winds for the global economy that are unfamiliar to those that did not live through the 1970s.
This could become an issue for many asset classes where valuations embody a considerable bet on the predictability and effectiveness of central bank support, including a monetary policy soft-landing in a Goldilocks economy that is not too hot or too cold.
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