The tumultuous COVID-19-related events of the past two years have led to supply chain disruptions across nearly every industry. One notable consequence of these disruptions is the semiconductor shortage. This shortage has led to bottlenecks for many sectors, including automobiles, tech products, and home appliances. While demand in the U.S. was initially low during the COVID-19-induced recession in early 2020, the recovery has been marked by strong demand boosted by, among other things, accommodative fiscal and monetary policies.

In recent months, bottlenecks have made it difficult for input suppliers to keep up with strong demand, contributing to a sharp rise in intermediate goods prices, including lumber and some metals. Indeed, as the orange line in the FRED graph above shows, the producer price index of intermediate goods started rising immediately after the 2020 recessionary period and increased over 21% year-over-year in September 2021.

On the other hand, the dotted blue line measuring prices of semiconductors and other electronic components shows that these prices have remained relatively stable. This contrasting price response in the two indices shown in the graph is intriguing. While an explanation requires careful research, it is possible that long-term contractual relationships between producers of some final goods (such as iPhones) and their suppliers of chips may have helped mitigate fluctuations in the overall semiconductor price index. It seems that the recent scarcity of semiconductors has not been reflected in prices. There is evident excess demand and, thus, rationing.

How this graph was created: Search for and select “Producer Price Index by Industry: Semiconductor and Other Electronic Component Manufacturing.” Open the graph, click on “Edit Graph,” open the “Add Line” tab, and search for and select “U.S. Intermediate Goods PPI.”

Suggested by Subhayu Bandyopadhyay and Praew Grittayaphong.