The post-COVID recovery is being hampered by an international shortage in some items, but that could mean good news for some ASX shares.
According to T Rowe Price Australia equities head Randal Jenneke, this is due to extreme consumption patterns caused by the pandemic in the past 15 months.
"A sudden shift in consumption away from services like travel, into goods such as electronics for furniture, coupled with global supply chain disruptions has generated imbalances across many markets from commodities to semiconductors," he said in a memo to investors.
"Copper hit an all-time high in April, and iron ore the highest level in a decade. There's also [a] notable supply/demand imbalance in the property market."
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Semiconductor shortage sets a rocket under one ASX share
One supply imbalance that's having a global impact is the shortage of semiconductors.
Semiconductors are materials that contribute towards computer chips. And with so many everyday items now computerised, everyone's feeling the pinch.
"The semiconductor shortage has had significant impacts on the auto industry," said Jenneke.
"With the US first-quarter earnings season underway, the largest automakers highlighted production constraints due to input shortages (chips), which in turn has eaten into profits."
For the Australian market, this supply anomaly won't be rectified until 2023, according to Jenneke.
And that's excellent news for one ASX company.
"This… means delays for new vehicles and higher prices," he said.
"For dealerships and marketplaces, including listed Eagers Automotive Ltd (ASX: APE), it means higher margins and a stronger outlook – the stock was our second largest contributor for the month."
The Eagers share price was up 1.1% on Monday to close the day at $14.66. It was trading at just $5.43 one year ago.
Imbalances don't equate to inflation
Supply imbalances are pushing prices up for many commodities and products.
But Jenneke warned that this doesn't automatically lead to economy-wide inflation, which would trigger higher interest rates.
"The RBA actually assessed the implications of supply chain disruptions for local businesses in its May statement on Monetary Policy," he said.
"It noted that 'issues have generally been mild and/or temporary' with only 10% of businesses experiencing severe supply chain issues. Moreover, the significant increases in freight costs experienced make up a small portion of total costs and that businesses have adapted to delays by changing order behaviour."
He added that these findings matched up with the Reserve Bank governor's comments that inflation would stay subdued in the medium-term with just temporary spikes.
"In turn, it supports their critical outlook for monetary policy to stay loose and rates to remain on hold over the coming years, which we believe should continue to be a large positive for domestic businesses and equity valuations."
