Supply-chain disruptions are derailing the global economy

China’s economy slows. Energy costs soar. Grocery store shelves in some countries empty. Automobile manufacturers and other goods producers around the world shut down because of semiconductor chip shortages. Shipping costs soar and car dealers and even Apple stores have record low inventories. Fast food joints run out of potatoes and carpenters out of wood. Supply chains are disrupted. Inflation lurks.

This is a Great Unravelling of the world’s previously unfettered global trading and economic system. It is a knock-on effect of the pandemic, and pent-up consumer demand, but is also a permanent re-adjustment of the global system due to geopolitics, trade tiffs, and an intentional de-coupling from China by the West and Japan.

For a commodity-based nation like Canada, the news is mostly positive as forestry, mining and oil companies fetch higher prices for their commodities than they’ve received in years. Oil hit US$80-a-barrel for the first time in three years last week and natural gas is up — the two key reasons why the Canadian dollar strengthened in recent weeks against the U.S. dollar. But, on the other hand, prices generally are on the rise, and Canada is a huge importer of food and manufactured goods. And Canada’s most important manufacturing sector, autos and auto parts, is being hit with chip shortages and reduced orders.

But all the world’s countries are negatively impacted by the supply chain disruptions and these conditions are blowing the world economy off course and impeding a full recovery from the economic fallout of COVID-19...

This was excerpted from the 12 October 2021 edition of the Financial Post.