2022 Economic Forecast (CONT’D FROM PAGE 28)
fied and reliable supply chains. Instead of buying in scale from two very large Chinese suppliers, they might buy in smaller increments from a half dozen suppliers located in different regions of the world. They may also utilize more long-term warehousing facilities. This strategy, which adds costs but reduces risk, will be extremely beneficial in pro- tecting against the next pandemic, black swan, or trade war.” Finding alternative sources, though, can be easier said than done. “Many businesses that would like to source do- mestically can’t find any vendor in the United States that can match Chinese prices,” says Conerly. “And Chinese companies have improved the quality of their goods sig- nificantly.” Adding to this litany of woes is the Chinese govern- ment’s increasingly heavy-handed control of industry, says Palisin. “Some of our members are asking, ‘If we have a critical supplier in China, how likely is it that the govern- ment will step in and intervene in that company, which could impact us getting access to our components?’” The Year Ahead As businesses enter the early months of 2022, econo- mists suggest watching a number of leading indicators for an idea of how the year will go. The first is the state of con- sumer confidence—a vital driver of the nation’s economy. Given favorable wages and income trends, one might ex- pect that consumers are feeling fairly good. In the closing
to widespread price increases for supplies. The supply chain imbroglio has engaged a broad spec- trum of industries. “Close to 95 percent of our members are experiencing supply chain issues,” says Megan Tanel, Senior VP of the Construction Sector for the Association of Equipment Manufacturers (AEM). “More than half say the issues are getting worse. There are transportation bottle- necks, materials and component shortages. For the vast majority of our members, these issues are both domestic and global. And they are causing huge constraints on pro- duction.” The increased costs resulting from order backlogs and delivery delays are only exacerbated by the China tariffs. While businesses were expecting some relief from the Biden administration, so far there has been no move to change the status quo. “Tariffs on Chinese goods will likely continue,” says Conerly. “In fact, given the friction between the US and China, it’s possible we could even get addition- al ones.” The double whammy of supply chain disruption and China tariffs are causing some businesses to look at al- ternative regional or local sources. “Many businesses are no longer relying on any single supplier or global region for goods and services,” says John Manzella, a consultant on global business and economic trends, East Amherst, NY ( JohnManzella.com ). “They are building more diversi-
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30 October 18, 2021
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