The shortage of raw materials, semiconductors and co. Is burdening German industry more and more. Production is falling. This can have consequences for the economy in Europe’s largest economy.
Delivery bottlenecks are slowing down German industry and, according to economists, are increasingly affecting the economic recovery in Europe’s largest economy.
In August, industrial production fell significantly by 4.0 percent compared to the previous month, as the Federal Statistical Office announced on Thursday in Wiesbaden. This is the sharpest decline since the slump during the first Corona wave in spring 2020. It was also more severe than analysts expected. “The delivery bottlenecks for raw materials and preliminary products turned out to be more serious than previously assumed,” commented the Federal Ministry of Economics.
According to an Ifo survey, companies are hoping for an increase in production. Economists expect, however, that industry will initially slow down the German economy.
Corona is having an effect
One of the reasons for the bottlenecks is the aftermath of the Corona crisis. In the course of the global economic recovery, the demand for semiconductors, for example, has risen sharply. Industrial companies sit on well-filled order books, but can sometimes not process them due to a lack of material. This affects mechanical engineering and car production, among others. In the case of car companies, the production lines keep standing still.
The production slump affected almost all sectors in August. The production of capital goods such as machines decreased particularly significantly. Activity in construction fell by 3.1 percent. Only the energy production was higher than in July.
Compared to the same month last year, production increased by 1.7 percent overall. However, the expectations of experts were clearly missed here as well. Compared to February 2020, the month before the Corona crisis spread to Germany, total production is 9.0 percent lower.
No improvement in sight
Commerzbank chief economist Jörg Krämer currently sees no signs of improvement. “In this respect, the … figures confirm our expectation that the German economy will barely grow in the fourth quarter after a strong recovery in the summer half-year.”
According to ING chief economist Carsten Brzeski, the delivery bottlenecks are now a greater threat to German industry than the corona pandemic. The analysis company Capital Economics spoke of growing fears of a “bottleneck recession”, ie an economic slump as a result of bottlenecks on the supply side.
Despite the shortage of materials, the industry hopes for an increase in production. The production expectancy index compiled by the Ifo Institute rose by 2 to 29 points in September, making it one of the highest values in recent years. “The order books are still full, only the material bottlenecks are causing problems at the moment and dampening the production plans somewhat,” said Klaus Wohlrabe, head of the Ifo surveys.
In addition, there is “the principle of hope” that companies can process the existing orders, said the economic researcher. The index also measures whether companies expect production to rise or fall. From a purely technical point of view, an expected improvement at a low level can therefore also generate a high index value.
The production expectation index is based on a survey of 2,000 companies as to whether they expect production to rise, remain about the same or decrease. The index results from the difference between the increasing and decreasing responses; it is adjusted for seasonal effects.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
