Amid all the hand-wringing over global supply chain snarls and how they’re fanning inflation, little attention in the U.S. is being paid to the demand side of the economy.
That’s despite mounting evidence that the American consumer’s supercharged spending habits are playing at least as big of a role in stoking higher prices as the bottlenecks of imported goods in West Coast ports.
Households have amassed more than $2 trillion in excess savings during the coronavirus crisis — thanks to the lockdowns during which spending was curtailed, the unprecedented stimulus money from the government and the boom in equities and housing values. At the same time, as shown in a government report Friday, the labor market is strengthening, with hiring and wages rising.
The buying-spree fueled by all these forces is generally a positive for the economy, underpinning the recovery from last year’s recession. But too much of a good thing can become a problem as strained suppliers get overwhelmed by the surge of orders, and react by jacking up prices.