Yahoo Finance Supply chains: Holiday demand causing 'softball through a snake' moment, Generac CEO says
Supply chain disruptions are slamming business left and right as the holiday season nears.
"You've got the proverbial softball through the snake right now," Generac CEO Aaron Jagdfeld said on Yahoo Finance Live (video above). "Christmas season demand, in particular, is exacerbating the problem. ... all signs kind of point to maybe by the second half of next year that some of these tougher supply chain challenges abate."
Generac sells products including pressure washers, water pumps, and portable generators. Jagdfeld noted that the demand is clear, but the supply side continue to be an issue.
"The demand out there is incredible for our properties, and that is everything from... generators and industrial applications to our battery storage technologies and our technology businesses," he said, later adding: "We could have had more out of the door in the third quarter if we hadn't gotten stuck in some of the supply chain challenges."
An Oxford Economics survey of 148 businesses —which together employ 6 million people and have an annual turnover of around $2 trillion — conducted between October 18 to 29 found that only one in five businesses affected by the supply chain disruptions believe that the worst of the crisis is over.
Many firms, such as mattress maker Tempur Sealy, are backlogged in terms of orders amid the supply chain disruptions. The company also recently turned down another 100 million orders.
If Tempur Sealy had been able to fill all the orders it received, sales would have been up 40% year-over-year in the third quarter, rather than the 20% it reported in earnings.
Supply chain disruptions may end in third quarter of 2022: businesses
While pandemic-related developments dominated the past surveys, only 19% of companies said COVID-19 was the top near-term downside risk in the Oxford Economics survey.
Instead, twice as many companies now view supply chain disruptions as the top risk.
About 56% of businesses said they’ve been affected by the supply chain crisis, and expect disruption to continue, and 64% said they expect this crisis to end after mid-2022.
Material and input shortages are the top source of the supply chain disruption, the survey found, followed by transportation bottlenecks and temporary labor shortages.
Amid this crunch, companies have begun introducing price increases on household products while economists continue to debate what transitory means.
Tempur Sealy CEO Scott Thompson previously told Yahoo Finance that his company had already raised prices on mattresses three times in the last twelve months and "would probably have to do another round here pretty soon."
Upsides and downsides
Businesses also see persistent disruption as a bigger threat to recovery than COVID-19 developments, and 42% of businesses said they’ve become more pessimistic over near-term global prospects.
Downside risks are also “perceived to have risen to their highest level in a year,” the survey stated, and 56% of respondents said they saw risks to global growth — up from 43% in September’s survey.
Climate change and higher debt levels as a “very significant risk” to the global economy in the medium-term by 34% of the businesses.
On the flip side, businesses are upbeat about consumer spending: A consumer spending boom, as households tap on accumulated savings, is the top upside risk by almost half of businesses.
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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