WASHINGTON: The global shortage of critical semiconductors is likely to last at least through next year and perhaps longer, US Commerce Secretary Gina Raimondo warned on Tuesday. Shutdowns of key Asian suppliers due to the COVID-19 pandemic crippled supplies last year, just when American consumers, flush with cash from government aid, went on a spending spree buying cars and electronics, which depend on the chips.
“I do not unfortunately see the chip shortage abating in any meaningful way anytime in the next year,” Raimondo told reporters following her recent trip to Asia. She said she convened a dozen CEOs, including leaders of chipmakers, during her time in South Korea to discuss the shortage “and they all agreed that … deep into 2023, possibly early ’24 before we see any real relief.”
She repeated her call for Congress to act to provide funding for legislation that aims to stimulate domestic manufacturing of the computer chips that are key to a wide array of products, from smartphones to medical equipment to vacuum cleaners. “We are really on borrowed time,” she said. “Every other country has subsidies on the table now, and if Congress doesn’t act very quickly,” key producers like Samsung, Intel and Micron “are going to build in another country and that be that would be hugely problematic.”
The US Senate and the House of Representatives each have approved $52 billion bills-the CHIPS Act and the America COMPETES Act-that would invest in domestic chip research and manufacturing, but so far have failed to agree on the final form of the legislation.
Meanwhile, Americans’ feelings about the economy deteriorated in May amid concerns about job prospects, but remained relatively strong even as high inflation bites, according to a survey released Tuesday. Amid the fastest increase in US consumer prices in more than four decades, made worse by the war in Ukraine, consumer confidence dipped slightly after a modest increase in April, falling to 106.4 from 108.6, according to The Conference Board’s monthly survey.
Consumers flush with savings and government support money have been a key driver of the recovery of the world’s largest economy, spending freely on big-ticket purchases like homes, cars and appliances. But supply chain snarls, made worse by COVID-19 lockdowns in China, meant demand has outstripped supply, and that dynamic has fueled inflation.
Feelings about the present situation dropped for the second month, falling more than three points to 149.6, caused by the deterioration in views on the labor market, with an increasing share of respondents saying jobs are “hard to get,” according to the report. Expectations for six months ahead retreated slightly to 77.5 after gaining in the prior month.
Lynn Franco, the institution’s senior director of economic indicators, noted that the readings are still relatively high despite the declines. “Overall, the Present Situation Index remains at strong levels, suggesting growth did not contract further in Q2,” Franco said in a statement, referring to the current April-June quarter. “That said, with the Expectations Index weakening further, consumers also do not foresee the economy picking up steam in the months ahead. They do expect labor market conditions to remain relatively strong, which should continue to support confidence in the short run.”
The Federal Reserve has launched an aggressive cycle of interest rate increases to tamp down inflation by cooling demand, which Franco said “pose continued downside risks to consumer spending this year.” The survey also measures consumers’ spending plans in the next six months, and shows a slowdown in intentions to purchase high-dollar items like homes and cars.
“Vacation plans have also softened due to rising prices. Indeed, inflation remains top of mind for consumers,” Franco said. Ian Shepherdson of Pantheon Economics noted that households still have a stockpile of cash and “So far, they have been willing to dip into these savings despite reporting that they feel less positive. It’s not called retail therapy for nothing, but we just don’t know how long it will continue.” – AFP