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Friday, July 23, 2021
Demand is leading supply
We've written at length in The Morning Brief about the role demand is playing in the economic recovery.
Demand for workers is pushing up wages.
Demand for goods and services is pushing up prices.
Throw a dart at just about anywhere in the economy and you'll find unmet demand held back by some version of a supply bottleneck.
This environment is most often talked about in terms of inflation, wage growth, and the sustainability of these trends. Yet large corporations have now entered what Whirlpool (WHR) CEO Marc Bitzer calls an "upside down" world.
"The term I use internally is we're living in an upside down world," Bitzer told Yahoo Finance Live on Thursday, when asked about how demand is impacting Whirlpool's business.
"We all pretty much grew up in an environment [where] you had excess supply and you had to create demand. Right now, it's the opposite. You have excess demand and you have to create supply," he added.
Coming out of the last recession, the sluggish recovery was ultimately characterized by a glut of supply and a lack of demand. There were too many overeducated workers chasing too few jobs, too many homes with too few qualified buyers, and so on.
This recovery, of course, is almost the exact opposite.
And so whereas a stylized model of a company like Whirlpool (one might've previously called it a marketing firm with an appliance manufacturer tacked on), the company has now been turned on its head in a continuing race to make enough stand mixers and blenders.
Later in our conversation, Bitzer mentioned that at this time of year, the company would typically see a prospective buyer waiting to purchase a new dishwasher, until an expected Labor Day or Black Friday sale came along.
Instead, consumers are shelling out early — and often— for new appliances, knowing a product is likely backordered for months (A waiting period your dishwasher-less author knows only too well).
As for the future of this demand environment, Bitzer has outlined, both in our conversation and on the company's conference call, that the pre-pandemic environment for their business is not coming back anytime soon.
"Just think about yourself and think about your friends," Bitzer told Yahoo Finance Live. "People are spending significantly more time at home as compared to the office or other premises and it just drives appliance consumption," he explained.
"You just use the washer a lot more, you use the oven a lot more... Households have cash available in their checking accounts," Bitzer added.
"So you have disposable income, a general reorientation of the consumer to the home, which will not go away...People just spend more time [at home], they're willing to invest more in the home because they can't invest in international travel... and that's what we're seeing across the board and we don't see that going away very quickly," the CEO said.
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