Profits come before growth in a post-pandemic economy

IT should be a great year for economic growth. The mass distribution of vaccines combined with multiple rounds of fiscal stimulus and pent-up demand for in-person activity provide plenty of reason for optimism in 2021. But if you're looking for a potential stumbling block for the economy, consider the container shipping market, where prices have surged in response to rising US consumer demand for imported goods.

Demand for goods has gone up during the pandemic as consumers spend money on physical items rather than activities like travel and dining, leaving the container shipping market supply-constrained and unable to keep up with demand. And while ordinarily the response to rising demand would be to increase supply accordingly, the dynamics are different in a consolidated industry where a handful of players control how much supply to produce - as now exists in the container shipping market.

The same is increasingly true in the homebuilding industry, where inventories remain at historically-low levels. And we saw similar dynamics at work among airlines prior to the pandemic: the consolidated industry was punished by investors whenever it got too ambitious in increasing capacity.