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WSJ - Related supply shocks hitting US economy

In recent days, the U.S. suffered two supply shocks: an attack on Saudi oil production sent crude prices sharply higher and the United Auto Workers walked off the job at General Motors. Neither event would be worrisome in isolation. But they aren’t isolated. They are the latest in a series of supply shocks for the American and global economies.

  • Some are idiosyncratic and acute, like the grounding of Boeing’s 737 MAX airliner or an outbreak of African swine fever that has sent Chinese pork prices soaring. Others are more systemic and slower moving: A retreat from globalization is raising trade barriers; resistance to immigration could aggravate labor shortages; and geopolitical threats hang over the oil market.

  • By restricting the supply of a vital product or input, such shocks can undermine economic growth, push up inflation, or both. Right now, investors and economists see these supply shocks as a threat to growth, but not inflation. They might have it backward.

  • The U.S. shows no sign of slipping into recession and the labor market—judging by the unemployment rate—is the tightest in half a century. Inflation excluding food and energy in the past few months has bounced back to around 2%. The risk of rising inflation isn’t high, but in these circumstances it definitely isn’t zero.

from WSJ

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