Industrial capacity tightness to take time to relieve

Global industry has recovered strongly from the pandemic, according to Oxford Economics. However, the recovery has encountered headwinds from material and component shortages as well as transportation bottlenecks, with several sectors not able to increase production fast enough to accommodate the strong rebound in demand.

Supply chain disruptions across most sectors should begin to unwind from second half 2021, as the reopening of consumer services and diminishing fiscal support lead to a moderation in goods demand, while easing material shortages allow manufacturers to ramp up production.

This moderation in disruption will be gradual, however, and Oxford Economics expects capacity to remain tight and price pressures to stay firm for the rest of this year. Rebuilding inventories and clearing backlogs will take time. And potential labor shortages, along with virus outbreaks in emerging economies with low vaccination rates, could constrain the near-term supply response.