Semiconductor Shortage Could Drive Inflation and Hurt GDP

April 23, 2021

As the global shortage of semiconductors drags on, economists say it could drive inflationary pressure and dampen economic growth. Soaring demand and supply bottlenecks have led to a shortage of semiconductors, which are used in everything from cars to computers to touchscreen phones.

Economists at Goldman Sachs say that for most of 2021, the shortage will drive prices of affected goods as much as 3% higher. This would boost overall inflation by as much as 0.4% through the end of the year.

Goldman Sachs also notes that though semiconductors account for just 0.3% of U.S. output, they are an important production input that could impact as much as 12% of GDP.  They also estimate that the shortage could cut automotive production by 2% to 6% this year. 

Goldman Sachs economists do project that the ultimate impact to GDP would be modest, subtracting 0.5% to 1% from overall activity.

Any impact the shortage does have is not expected to last long, as the supply is expected to catch up with demand later this year.

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