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and are now up 6.2% from a year earlier – higher than most economists’ estimates and the fastest increase in more than three decades. At this point, that may be no surprise to most Americans, who are seeing higher prices while shopping for shoes and steaks, dining at restaurants and pumping fuel in their cars.

among economists, like and is whether these soaring costs are transitory or permanent.

The Federal Reserve, which would be responsible for fighting inflation if it stays too high for too long, , that it’ll be temporary, in large part because it’s bedeviling economies, companies and consumers.

– including – and there’s been a growing chorus of , and sounding the alarm that high inflation will likely be with us well into 2022 and beyond.

and their impact. It’s true that prices are surging largely because of the and in supply chains, but , that doesn’t mean it’ll be temporary. Rather, it suggests that inflation is here to stay.

Demand Is Up

Inflation began to soar in early 2021 and , year on year, since May. That’s more than double the 2% pace that the Fed has set as a target.

The reasons prices are rising are complex and many. But one of the most important relates to the dynamic of supply and demand. And both are to blame.

Let’s start with demand.

Even though early in the pandemic consumer demand dropped as , it has soared over the past year – not for services like restaurants and travel, but for goods, mostly ordered online.

E-commerce activity has simply mushroomed to levels that never existed before the pandemic. or ship what is ordered. Some people aren’t even going to the supermarket, hardware store or restaurant anymore because they do all their ordering online.

Many retailers, such as Macy’s, Target and others, have had to to stay alive during the pandemic.

E-commerce activity has simply mushroomed to levels that never existed before the pandemic.

These trends have created more demand than the delivery carriers can accommodate, stretching their ability to deliver products. For example, the holiday shopping season is predicted to have or deliver. Storing these packages for even a short period costs money.

Given there is great difficulty finding drivers, containers and labor across industries, big retailers are to both attract and keep employees on hand as a means of adding capacity.

All these added costs – to hire, store and deliver – are usually passed on to consumers.

Supply Is Down

At the same time, supply chains remain a mess – and .

, putting great strains on the capacity of supply chains to deliver in a timely fashion. And and other workers are making it difficult to expand capacity or fix other problems plaguing the supply chains, so they can’t break free of the thick mud they’re in.

This creates a shortage of products getting through that limits competition, causing price increases.

continually idling near ports in Los Angeles, New York and elsewhere around the world, which is tying up large quantities of merchandise waiting to be unloaded. with about near Southern California alone.

– U.S. President Joe Biden and plans to spend billions of dollars fixing the problems – but there are not enough workers and drivers to unload the cargo.

Such delays cost money, because businesses choose then to carry more inventory, which they pass on to customers.

As an illustration, let’s look at Nike, which for much of its shoe production. It lost 10 weeks of production because of lockdowns within that country. And it’s taking an average of 80 days to get shoes from Asia to retailers in North America – twice as long as before the pandemic. As a result, like everything else.

Or consider , a Utah-based furniture retailer, which reports that it has only 55% of its normal inventory on hand because of freight delays. Cars get stuck in garages because of the shortage of spare parts. Living room, kitchen and dining room furniture prices .

Another way to think about it is to examine one single product: . It requires 1,850 separate parts. Supply chain disruptions have pushed manufacturing time from six weeks to six months.

There is no industry unaffected.

Why There’s No Easy Fix

In other words, there’s no end to the supply chain problems. Consumer demand is only going to increase through the holiday season and beyond. And that’s why inflation .

Corporate executives – who in many ways will determine whether prices keep rising at a fast clip – that all of these challenges are going to continue into 2022 at the earliest. Some say the problems will extend into 2023 as well.

expect inflation to slow to 3.4% next summer and hit 2.6% by the end of the year. While that would be encouraging, it’s still well above the pre-pandemic average of 1.8% and outside the Fed’s target. It’s unclear whether economists are recalibrating their expectations after the October Consumer Price Index report.

Regardless, consumers should get used to the higher prices. They’re the new normal.

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