What Can Stockouts Tell Us About Inflation? Evidence from Online Micro Data

Rising inflation in 2020 during the COVID-19 pandemic sparked a lively debate about whether the years of low inflation were ending. Policy-makers and economists often mention supply disruptions and cost pressures as playing a role, but little is known empirically about their actual impact on prices.

In this paper, we construct a high-frequency measure of product shortages by using data collected directly from the websites of large retailers in multiple sectors and countries. We focus not only on the "out-of-stock" signals that are visible to consumers but also on the higher than usual incidence of discontinued goods, which are harder to detect. Our stockout measures show that shortages were widespread early in the pandemic, affecting far more than just toilet paper and disinfecting wipes. Over time, the composition of shortages evolved from many temporary stockouts to mostly discontinued products, concentrated in fewer sectors. This may have made the stockout problem less visible, but not less important.

We find that sharp increases of stockouts are associated with a significant inflationary effect. In the United States, for example, an increase in a stockout rate from 10 percent to 20 percent raises monthly inflation by about 0.10 percentage points. But the effect is also transitory. In the absence of additional shocks, we find no evidence of an inflation response beyond roughly four months after an increase in stockouts.