Board of Governors of the Federal Reserve System

June 26, 2026

A News-Based Approach to Measuring Shortages and Their Effects on the Global Economy

Dario Caldara and Matteo Iacoviello

The conflict in the Middle East has severely constrained global supplies of oil and natural gas. The conflict is also disrupting the provision of other inputs critical to global supply chains, such as naphtha and fertilizers, leading to lengthier delivery times and surging prices for affected products. To assess the possible effects of such developments on the global economy, researchers and policy analysts draw from a wide range of data, ranging from commodity prices, survey data, and indicators of supply chain pressures such as the Federal Reserve Bank of New York's Global Supply Chain Pressure Index (GSCPI). Overall, the various indicators point to supply chain pressures having increased in recent months, especially abroad.

In this note, we examine one indicator—the "shortage index"—that tracks newspapers' coverage of supply disruptions in the U.S. and abroad across history and economic sectors (Caldara, Iacoviello, and Yu, 2025). Such a news-based indicator complements other measures by capturing real-time, qualitative, and forward-looking information that surveys and economic data may miss or reflect with some delay. Because the index extends back to 1900, it places current events in historical perspective and allows us to estimate how shortages have moved with global activity and prices in the past. Using an econometric model, we find that a rise in our shortage index of the magnitude seen since the eve of the conflict has historically been associated with a reduction in world GDP of 0.8 percent and an increase in world headline prices of 1 percent after about three years.

The Shortage Index

Shortages have been a recurring feature of economic life. From widespread disruptions during major wars to the acute shortages of goods and labor during the COVID-19 pandemic, episodes of extensive shortages have been associated with strained supply chains, hindered production and consumption, and significant hardship for businesses and households.

While the textbook definition of shortages is the inability of supply to meet demand at prevailing prices, media, market participants, and the public often view shortages through a broader lens—for instance, associating shortages with severe supply-side pressures or the limited availability of specific consumption goods and production inputs. Furthermore, media discussions about shortages may conflate both ongoing and prospective shortages.

To assess the prevalence of shortages in this broad sense over history, we have constructed a shortage index that relies on textual analysis of 25 million articles in six major U.S. newspapers spanning from 1900 through the present. This index is constructed as the share of articles mentioning terms associated with shortages in four categories: food, industrial products, labor, and energy.¹ The index serves as a proxy for both domestic and global shortages, implicitly weighted by their relevance to a U.S. audience.

Figure 1 shows the monthly shortage index from 1900 through May 2026. The index varies considerably over time, with the most notable spikes linked to events related to the four classification topics. Adverse geopolitical events, especially wars, are strongly associated with severe shortages: the index rises sharply during World War I and during World War II, peaking at over 1,000 (10 times the sample mean) in January 1943, with spikes recorded across all shortage categories. Other events, such as the Suez Crisis and the Iraqi invasion of Kuwait in 1990, also coincide with substantial spikes. Labor shortages, particularly those caused by strikes, were historically significant, especially in the early part of the sample. More recently, the index spiked on several occasions during the COVID-19 pandemic. The first spike corresponds to shortages in medical equipment and healthcare workers at the pandemic's onset. A second, larger spike occurred at the beginning of 2022, driven by global supply bottlenecks as economies reopened after prolonged mobility restrictions in 2020 and 2021.

Figure 1. The Shortage Index

The black line in figure 2 plots our shortage index since 2020, together with its four subcomponents. In May 2026, the index stood at 175, a value substantially lower than the heights reached during the pandemic and accompanying recovery but 75 percent higher than the historical average. The recent readings mostly reflect news coverage of conflict-related shortages of energy and industrial products and, to a lesser extent, shortages of AI-related computer chips.²

Figure 2. The Shortage Index by Category Since 2020

Measuring the Effect of Shortages on Prices and Activity

To quantify the macroeconomic implications of movements in the shortage index, we estimate a three-variable statistical model comprising the shortage index, world GDP, and world inflation.³ The sample has a quarterly frequency and runs from 1960 to 2025, reflecting the availability of consistent quarterly world GDP and inflation data. The model identifies demand, supply, and shortage shocks by imposing restrictions on their joint economic effects and the slopes of the economy-wide demand and supply curves: Positive demand shocks raise both GDP and inflation, whereas adverse supply shocks lower GDP and raise inflation. Both demand and supply shocks can move the shortage index.⁴ In addition, we recover a separate "shortage shock" that explains movements in the shortage index that are not accounted for by demand and supply shocks.⁵

Figure 3 shows the macroeconomic effects associated with a shortage shock of the size estimated to have occurred since the start of the conflict. The shortage index remains above the no-shock baseline for several years, reflecting how historical episodes of heightened media coverage of shortages tended to be long lasting. Given the estimated historical relationships, in response to this shock, the model projects that global growth should decline, with world GDP growth declining 0.4 percentage points after one year, and a cumulative decline of the level of GDP of 0.8 percent after three years. The shock also lifts global inflation, with the predicted rise in world headline prices cumulating to 0.2 percent after one year and 1 percent after three years.⁶

Figure 3. The Adverse Economic Effects of Shortages

Our analysis finds that, historically, periods with elevated media coverage of shortages tend to coincide with episodes of large economic disruptions, triggered by events such as geopolitical conflicts, natural disasters, large production failures, and surges in demand that are associated with temporary capacity constraints. During these events, the slow adjustment of prices and wages likely caused shortages to persist and quantities to decline relative to the no-shortage counterfactual. The immediate reduction in activity, coupled with a slow and persistent rise in prices, distinguishes shortage shocks from standard supply shocks in the economic literature, which are associated with a larger and faster response of prices for a given decline in activity.

Shortages have historically been persistent, and our estimates inherit that persistence. If current shortages prove similarly long-lasting, the hit to global activity could be considerable and the rise in global inflation prolonged. One caveat is that past episodes need not be a good guide at the current juncture: the disruptions tied to the conflict could fade faster than the historical record suggests.

Bibliography

Gianluca Benigno, Julian di Giovanni, Jan J. J. Groen, and Adam I. Noble (2022), "The GSCPI: A New Barometer of Global Supply Chain Pressures," Staff Reports 1017 (Federal Reserve Bank of New York)

Dario Caldara, Matteo Iacoviello, and David Yu (2025), "Measuring Shortages since 1900," International Finance Discussion Paper 1407 (Washington: Board of Governors of the Federal Reserve System, May).