US bank chiefs confident supply chain disruptions are ‘transitory’

The widespread supply chain disruptions plaguing manufacturers and retailers across the world will probably work themselves out over the next few months, chief executives of the largest US banks have said.

“This will not be an issue next year at all,” said Jamie Dimon, JPMorgan Chase chief executive, at the Institute of International Finance conference this week. “This is the worst part of it and the great market system will adjust for it.” 

Still, the chief executives of Bank of America and Wells Fargo acknowledged in remarks at the IIF conference that they initially underestimated the extent to which shortages of labour and materials would upend global supply chains.

“Six months ago when this was raised to me by clients around the country . . . you never would have thought it would have gotten so much worse since then,” said Brian Moynihan, Bank of America chief executive, on Tuesday.

Charlie Scharf, Wells Fargo chief executive, expressed similar surprise at the extent of the disruptions, but said he believed the problems were “transitory”.

The comments from Wall Street come as the Biden administration is increasingly worried that supply chain bottlenecks could weigh down the economic recovery.

The White House created a supply chain disruption task force in June to try to start addressing some of the backlogs, in areas ranging from transportation, to food processing and semiconductors, but the trend has not yet reversed.

In a sign of the growing concerns of the disruptions, president Joe Biden will on Wednesday meet with top officials and other stakeholders for talks on their “collective efforts to address global transportation supply chain bottlenecks”. 

Banks like JPMorgan and Wells Fargo are in constant communication with commercial clients through their large trade financing and cash management businesses, putting them close to the pulse of brewing economic threats.

“I think we understand the intricate interconnectedness of the global supply chain and in ways that . . . people more broadly probably don’t,” Scharf said. “What we just have to protect against is people making decisions that exacerbate the problem, which is trying to add to inventories too quickly.”

Backlogs at factories, ports and trucking dispatches have been wreaking havoc on supply chains since the end of last year when consumer demand rebounded from the depths of the pandemic, dramatically outstripping supply. Those trends, along with a shortage of workers, have contributed to a striking increase in transportation costs.

Retailers have responded by building up stock, leading to ballooning inventories and off-season promotional sales.

Moynihan said it was too soon to say whether or not the shortages would lead to price increases that make goods unaffordable: “That’s the grave concern right now.”

Additional reporting by Joshua Franklin in New York

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