The slowdown in the economy and the sharp rise in inflation in many developed countries signal the presence of bottlenecks along global production chains. When supply does not meet demand, the prices of goods and services along the entire production chain tend to rise. Monitoring production bottlenecks is helpful in assessing future economic outcomes.
However, supply not meeting demand can result from either demand side or supply side shocks. In the first case, an increase in supply but to a lesser degree than a rise in demand, generates upward pressures on prices: this situation is typical of cyclical recoveries. In the second case, the upward pressure on prices mainly reflects lower levels of activity and employment despite rising demand.1
In the absence of a single statistic that defines the nature and measures the intensity of bottlenecks, it is sensible to consider a range of indicators from different sectors and geographic areas.
The delays in seaborne trade may be evidence of supply chain bottlenecks (see Charts 1a and 1b). Much of the intercontinental trade occurs by sea. Since consumer demand for goods has recently surged, the outcome has been much longer queues of vessels at main international ports than one would have expected in an ordinary business cycle recovery.
