Supply Chain Disruptions During the COVID-19 Recession

Production of durable goods relies on complex global value chains (GVCs), where several stages in the production process are outsourced. While GVCs allow firms to benefit from specialization, there are risks, as firms are exposed to both domestic and foreign shocks. The unprecedented events of the COVID-19 recession, with a global health crisis that led governments around the world to implement containment policies, put pressure on supply chains and shipping networks—at that same time demand for these goods increased rapidly.1 Supply disruptions, combined with a shift in demand toward durable goods, resulted in supply and demand mismatches and bottlenecks. In this essay, we document the unprecedented nature of these supply and demand mismatches. Figure 1 plots data from IHS Markit on world manufacturing backlogs between January 2003 and December 2021. Backlogs measure monthly changes in the number of unfulfilled new orders. The index values are relative to the previous month: 50 represents no change, values below 50 indicate bottlenecks have loosened (i.e., there are fewer unfilled orders and unused production capacity), and values above 50 indicate bottlenecks have tightened (i.e., there are more unfulfilled Supply Chain Disruptions During the COVID-19 Recession