There are Pandemic Shortages, but Prices aren't Rising : The Indicator from Planet Money The pandemic spurred a year full of shortages, so why haven't producers responded by raising prices in most cases?

Shortages: Inflation In Disguise?

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Darian Woods, it is Friday. Time for Indicators of the Week.


VANEK SMITH: And during this week, our indicator comes from your mom.


Hi, Mom.

UNIDENTIFIED PERSON #2: Hi. How are you?

WOODS: Not too bad.

VANEK SMITH: Aw, so cute.

WOODS: So I called my mom because of something she did when we were kids. And it involved building up a stash at home of a lot of ketchup packets, or as we call it, tomato sauce.

So I'm calling to apologize.


WOODS: Well, I think I thought it was a little bit hoarding behavior, but there's actually now a tomato ketchup packet shortage.

UNIDENTIFIED PERSON #2: (Laughter) Well, it probably was a hoarding behavior. And I don't think I've still got them, so...

WOODS: So you can't cash in.

UNIDENTIFIED PERSON #2: I can't cash in on my tomato sauce packets.

VANEK SMITH: So we should say, Darian, that there is a shortage of ketchup packets. And people have started selling them on eBay for - I don't know - like a few dollars apiece.

WOODS: Yeah. It seems to be a little cash cow.

VANEK SMITH: And we should say, Darian, the shortages are happening all over the economy. I mean, it's crazy. We've got semiconductor chips, cat food, yeast, Xboxes, boba tea, pickle jars...

WOODS: Lumber, bicycles, outdoor furniture, rental cars, chicken wings, gardening supplies...

VANEK SMITH: Those little French bulldogs. There's a shortage of them.

WOODS: There was a shortage of garden gnomes in the U.K.


WOODS: And, of course, ketchup.


WOODS: And I'm Darian Woods. Today on the show, shortages. In a lot of ways, these shortages seem like a blip, something that has happened at a moment when everything kind of got haywire and a bunch of supply chains got disrupted. But a lot of people are saying these shortages could actually be an economic omen. They could be inflation in disguise.


VANEK SMITH: Before we talk about the link between shortages and inflation, we should take a second to talk about inflation or specifically out-of-control inflation because it is one of the big ones, one of the big economic monsters. It's really destructive. And it is scary.

WOODS: So inflation is just prices rising. But out-of-control inflation is prices rising and rising and rising and rising. That's your coffee going from $3 to $6 to $10. And all of a sudden, the money you've saved up doesn't buy very much. Conor Sen is a columnist for Bloomberg View.

CONOR SEN: Inflation is kind of a funny thing because so much of it depends on psychology and what we think the future is going to be like. Consumer psychology is about prices. And they think, well, if it's going up now, it's going to go up more in the future, I should buy more today, which then leads to even higher prices. And we get in this sort of nasty spiral.

VANEK SMITH: Right. Like, you know, I'd better spend my money right now before things get even more expensive and my money's worth even less and, like, a coffee costs $50. You know, then you've got people spending like crazy. And that pushes prices up even more, which panics people and makes them buy even more. You know, Darian, I always think of spiraling inflation like a vampire just sucking the value out of our money, right? It can kill a currency. It's no joke.

WOODS: Yeah. I'm not going to laugh. Sorry.

VANEK SMITH: (Laughter).

WOODS: But when governments pump a lot of money into the economy, worries about inflation come up because when you start sending people checks, there's an idea that they might use that money to buy more stuff. Demand for stuff goes up, and businesses start running out of stuff to sell. So then they raise prices on that stuff. And that risks the terrible vicious cycles.

VANEK SMITH: So that is the worry. But so far, with the few exceptions, all the spending the government has been doing has not caused prices to rise. They've been pretty steady. And most economists are saying inflation is not an issue right now. We do not have to worry about vampires. But you know the thing about vampires, Darian.

WOODS: They like to dress in formal wear?

VANEK SMITH: Yes. And they are famously shape-shifters. They can turn themselves - right? - into like bats and wolves and little herds of rats. What if inflation could also shape-shift? So some economists are saying that all of these shortages we're seeing might be inflation in disguise.

WOODS: Now I'm really frightened.

VANEK SMITH: Be very afraid (laughter).

WOODS: So here's how this would work. So the first part of that inflationary spiral, people have more money, and then they start buying more stuff, and then businesses start running out of that stuff. Well, that's already happening. But the second part of that spiral - businesses seeing all that demand and raising prices - that hasn't really happened as much.

VANEK SMITH: And now, the big question hanging over the economy, says Bloomberg's Conor Sen, is why aren't businesses raising prices for things that are selling out? And he says part of the reason is that, like, nobody knows what is happening in the economy right now. And so companies are hesitating to react the way they would in just a normal economy.

SEN: If all of a sudden, a producer raises prices, they're also afraid that consumers won't pay more. And so we're kind of in this sort of game of chicken where nobody's really sure if the other side is going to raise prices and if the other side will tolerate it.

VANEK SMITH: Yeah. And companies are not sure if the demand for all their stuff is real and. They are afraid if they raise prices, like, the bottom will fall out and nobody will buy their stuff. Like, maybe there's a shortage of stuff because it's been a really weird time, and there have been a bunch of supply chain disruptions, which is true.

WOODS: Also, maybe the demand for that stuff has only gone up for a short period of time because that's all people could spend their money on because they couldn't go out on trips or to the bar or concerts and ballgames. And now that things are reopening, people will go back to spending on trips and bars and ballgames, and we will buy less stuff. Demand could drop off.

VANEK SMITH: And there could be another reason that companies aren't raising prices right now, kind of like an emotional reason.


IAN BYRNE: Good afternoon. Highfield Garden World speaking.

VANEK SMITH: Oh, yes, hi. Is this Mr. Byrne?

BYRNE: Hello.

VANEK SMITH: Ian Byrne is the assistant manager at Highfield Garden World in Gloucestershire, England.

WOODS: Ian says, for all of last year and this year, people were going crazy for seeds and outdoor furniture and composters and flowers and vegetable plants.

BYRNE: I've never experienced anything like this ever, nigh on 40 years within this retail side of business.

VANEK SMITH: Ian says Brits have been going crazy for all things gardening, including garden gnomes.

BYRNE: There's definitely a new market there.

VANEK SMITH: I mean, I'm familiar with the little guy who has the beard and the red pointy hat. Are there other gnomes?

BYRNE: Very similar on the things, but they may well be doing different things. We've got things of fishing, cricketing gnomes, footballing gnomes, sporting gnomes.

VANEK SMITH: (Laughter).

BYRNE: For the last six months, we haven't had a gnome anywhere near Highfield.

WOODS: Nary a gnome in the last six months.

VANEK SMITH: Nary a gnome.

WOODS: But in spite of all this crazy demand, Highfield did not raise the price of its gnomes. They cost about $30.

BYRNE: No, we haven't raised the price.

VANEK SMITH: How come?

BYRNE: We don't want to sort of profiteer through charging over the odds for a gnome.

VANEK SMITH: Oh, it feels like you'd be sort of taking advantage of a difficult time or...

BYRNE: Yeah, I think so.

VANEK SMITH: Bloomberg's Conor Sen says this is another reason we might not be seeing inflation right now. There's this kind of decency pressure on businesses not to raise prices at a time that has been so rough for so many millions of people.

SEN: Kind of like after a natural disaster, you don't want to raise the price of bottled water 'cause it just looks really bad.

VANEK SMITH: Conor says it will take at least six months to see if inflation is a problem in the post-pandemic economy as businesses and our countries start to emerge from lockdown and hopefully get back to normal.

WOODS: In the meantime, Ian and his team went on a quest to get more gnomes in stock. Finally, after months of trying, they managed to get one shipment a couple of weeks ago.

VANEK SMITH: Are people coming in especially for gnomes right now?

BYRNE: Actually, they are, yes.


BYRNE: Yeah (laughter).

WOODS: And after all of Ian's work to try to get a shipment of the little guys, his colleagues chipped in and they bought him one.

VANEK SMITH: What is he like? What is your gnome like?

BYRNE: (Laughter) He's a weightlifting gnome.



BYRNE: He has weights above his head, and he's in a leopard skin leotard.


WOODS: And it remains to be seen if the wild demand for gnomes is a sign that inflation is happening and it's just shape-shifting into shortages.

VANEK SMITH: Or, if this is just a blip, a moment when people had an exceptional amount of time to spend in their garden and an exceptional amount of money to spend on little gnomes for their garden.


VANEK SMITH: This episode of THE INDICATOR was produced by Jamila Huxtable, with engineering by Gilly Moon. It was edited by Kate Concannon. And THE INDICATOR is a production of NPR.

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