Bloomberg

What hoarding toilet paper means for economic data

Foto: AFP/William West

Last year, the world became intimately acquainted with the idea and practice of hoarding toilet paper. Grocery shelves were suddenly cleared as people rushed to build up their own personal supplies of the white stuff. While the supply of bathroom tissue hadn't suddenly changed, a sharp jump in demand for it created the appearance of a shortage.Now, Bank of America economist Ethan Harris points out that the toilet paper-esque strategy of hoarding has gone global, in the sense that more and more companies are buying essential materials, components and other inputs, in order to manage potential future supply shocks and deal with resurgent demand.

"The clogging up of global supply chains could ease over time as specific shocks fade, but the fundamental problem is one of strong demand and low inventory. New technology such as tracking systems has enabled businesses to operate with very low inventories. That is great in good times, but it makes the system highly vulnerable to disruption. Even worse, faced with shortages companies are starting to double order to ensure that they are high in the queue. This is the business sector equivalent of emptying the grocery store in front of a hurricane or hoarding gas or toilet paper at the first hint of shortage."..

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