Resilience depends on effectual demand

It has been my experience that where and when there is effectual demand — in other words, needs or desires with resources to cover the costs of supply plus a reasonable margin — there is a substantive basis for Supply Chain Resilience. There can still be plenty of troubles, but where there is meaningful pull there will — eventually — be close to calibrated push.

According to this morning’s release by the Bureau of Economic Analysis, during April the growth rate of American consumption increased more slowly than in recent months (here and here). But the overall level of effectual demand remains quite robust when compared to pre-pandemic patterns. Please see the chart below. Inflation-adjusted spending on goods (blue line) has essentially been flat for nearly three years. Spending on services (red line) flattened some in April. Services spending continues to be stronger than ever before and goods spending is within a conversational range of its strongest pull. (More)

According to the BEA, “Within services, the largest contributors to the increase were housing and utilities (led by housing), health care (both outpatient services and hospitals), and financial services and insurance (led by financial service charges, fees, and commissions). These increases were partly offset by a decrease in transportation services (led by air transportation). Within goods, the largest contributors to the decrease were spending for recreational goods and vehicles (led by information processing equipment) and other nondurable goods (led by recreational items).”