Flexport Chief Economist Phil Levy joins Yahoo Finance Live to discuss inflation, labor shortages, supply chain constraints, consumer demand, and the outlook for cargo shipments.

Video Transcript

DAVE BRIGGS: The ongoing supply chain crisis is fueling inflation to 40-year highs. What does this mean for the Fed and the economy as a whole? Phil Levy is the chief economist at Flexport and joins us now. Phil, good to see you. You retweeted Friday morning that this is a whatever it takes moment for the Fed. The Dow is down more than 1,000 points since then. The S&P and the NASDAQ have followed suit. What would you like to see from the Fed on Wednesday?

PHIL LEVY: I think the Fed is in a difficult position now. It's like the old joke, you know, how do you get there? And so, I wouldn't start from here. So I guess I would like to see a 75 basis point hike. That's not an official Flexport position. It's my own. I think the Fed is behind in terms of addressing inflation. What we see right now is that the Fed funds rate is dramatically below even the most conservative measure of inflation. And that means that we're still stimulating.

RACHELLE AKUFFO: And so at this point, I want to check in with your flex point-- Flexport's post-COVID indicator, one of the indicators that you have looking at what we're seeing post the peak of COVID there. And you're looking at the measuring the balance between the US consumer spending on goods versus services. What are you seeing there?

PHIL LEVY: Yeah, I'm glad you raised that because to me, that's right at the heart of the story of what's happened and how we ended up with this, which is that you see the scale right there. What that scale shows is zero is what we had as the norm, the balance of goods and services before the pandemic. People tilted very heavily towards consuming goods. That's what put strains on supply chains, and it helped drive up the prices.

What we have been seeing most recently is some hints that this may moderate. There's a difference between what we see for durables, which seem like the demand is lasting, and nondurables, which seem to be falling off a little bit more. But we have not yet seen a return to what had been very, very much the steady norm before the pandemic.