Why Is the Supply Chain Still So Snarled? We Explain With a Hot Tub.

Utah manufacturer Bullfrog Spas depends on a complicated network to bring materials from across continents and oceans. The pandemic put it out of whack.

That sums up the problem for many manufacturers.

As Fed Chief Jerome Powell noted at the end of September, bottlenecks and shortages of key raw materials are “not getting better—in fact at the margins (they are) apparently getting a little bit worse.”

Like severe labor shortages, supply chain problems are crimping profitability, limiting sales, raising prices and hampering economic growth. Investors are taking note.

An uptick in bond yields near the end of the month also dampened sentiment. While yields remain quite low, they ticked higher after the Federal Reserve took on a slightly more hawkish tone at the September 22 meeting.

These are probably the biggest reasons for the pullback last month.

Not to be Debbie Downer, but let’s look at a few more.

The debate over the debt ceiling is taking shape. The U.S. Treasury has said it will run up against the current debt ceiling on October 18. That means it can no longer borrow to fund operations, and the U.S. would default on its debt unless Congress extends the ceiling.

As Moody’s Analytics recently noted, “The debt ceiling will be raised. Not doing so would be catastrophic for the economy, so this is an extremely low probability event.”

We’ve seen this drama play out before, and lawmakers avoided sailing into uncharted waters. Still, it’s causing some headline anxiety.

China’s largest and most indebted property developer is on the brink of bankruptcy. While Western financial exposure is likely limited, a disorderly default could create big problems for the world’s second-largest economy.

Finally, an energy crisis is brewing in Europe, while natural gas prices hit new highs in Asia. They are running about six times what we see at home (Reuters).

The U.S. isn’t directly affected, but these are costs that may get added to manufactured goods or could restrict output, adding to supply chain woes.

As a trusted financial advisor for small business owners, we like to keep our finger on the pulse of changes that could affect the value of your business. If you’d like to continue the conversation, get in touch with one of our advisors.