Did supply chains deliver pandemic-era inflation?

Philip Levy

No PB24-10, Policy Briefs from Peterson Institute for International Economics

Abstract: This Policy Brief argues that supply chain breakdowns were not a principal cause of pandemic-era inflation. Levy focuses on US trade in containerized goods and shows that, within months of the pandemic's onset, the quantities of goods delivered in fact increased significantly. The sharp increases in inflation and shipping prices and the accompanying delays and empty shelves in the presence of significantly increased quantities suggest, instead, a large positive demand shock. Goods consumption levels rose sharply and remained elevated into 2023 and beyond, even as shipping delays and price hikes dissipated. The author concludes that, while it may be worthwhile to make supply chains more efficient and aim for increased elasticity of supply, the goal of avoiding inflation and shortages is likely better met through improved demand management.

Date: 2024-10
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