Shortage of semiconductors, dubbed the ‘new oil,’ could dent GDP growth, boost inflation

Shortage of semiconductors, dubbed the ‘new oil,’ could dent GDP growth, boost inflation

Economic growth could slow and inflation is likely to see at least a momentary bump higher as the semiconductor shortage worsens, economists say.A variety of factors have converged to make the coveted computer chips scarce. Soaring demand coupled with supply bottlenecks have led to a situation in which orders for everything from cars to televisions to touch-screen computers and more are on backup for six months or more.With semis at the core of so much U.S. economic activity, the ongoing supply problems are likely to have ripples.Goldman Sachs economists say that for the bulk of 2021, the shortage will translate into an inflationary tax that could result in prices rising as much as 3% for affected goods. That would boost inflation as much as 0.4 percentage points through the rest of the year, the firm said.

"Taken together, while we see relatively modest implications of the semiconductor shortage for GDP growth and the industrial sector, it represents another reason to expect core goods inflation to remain firm this year," Goldman economist Spencer Hill said in a note.Even though the hit won't cause a dramatic slowdown to an economy expected to roar in 2021, the impact could still be noticeable. Goldman said