Supply crunch morphing into full-blown global crisis

New Delhi, Oct 2 A supply crunch that initially put a question mark over the availability of luxury cars or whether there would be enough PlayStations under Christmas trees is instead morphing into a full-blown crisis featuring a shortage of energy, labour and transport from Liverpool to Los Angeles, and from Qingdao to Queensland, The Guardian reported.

All the problems are in one way or the another tangled up in the surge of post-pandemic consumer demand, but taken together they threaten what one leading economist calls a "stagflationary wind" that could blow the global economy off course, the report said.

Mohamed El-Erian, and adviser to the insurance giant Allianz and president of Queens' College, Cambridge, says this week's surprise fall in factory output in China was a clear warning that the world economy could slump while prices were still rising quickly, a doomsday double whammy that almost sank the UK in the 1970s, the report said.

"The supply chain problems are much more persistent than most policymakers expected, although companies are less surprised," he said, "Governments are having to rethink quickly because the three elements - supply side, transport, labour - are coming together to blow a stagflationary wind through the global economy."

Energy shortages are providing the starkest illustration of the problem, with increasing numbers of petrol stations in the UK running out of fuel, and cities in northern China having to ration power and force factories in the world's number one manufacturing nation to shutter just when pre-Christmas demand is reaching a peak in the west, the report said.

Both countries have been caught out by not having enough reserves amid a scramble throughout the world for natural gas and for oil, which has almost doubled in price in 12 months to nearly $80 a barrel, the report said.

Along with ongoing Covid-related restrictions in some large manufacturing countries such as Vietnam, and a well-documented shortage of components such as computer chips, factories are simply not producing enough, the report added.