German industry facing record shortages

Published on 12 Dec. 2021 at 12: 38

German industry ended the year in a difficult situation. According to the Ifo Institute, in December, more than eight in ten industrial companies were suffering from bottlenecks and supply problems.

If it has been several months since German manufacturers, like their European neighbors, have suffered from supply problems , this time it is a question of record level since the start of the crisis: nearly 82% of the companies questioned did indeed report problems with the supply of raw materials or in components. They were only 38, 4% a month earlier.

Order books are full

“The situation in industry is paradoxical”, summarizes Klaus Wohlrabe, expert from the Bavarian Economic Institute. “The order books are full, however the lack of equipment does not allow companies to increase their production accordingly,” he explains.

In fact, all sectors are affected. But the shortages concern in particular the manufacturers of electrical equipment. Nearly 94% believe they are paralyzed by the lack of supply of semiconductors, still largely imported from Asia.

In turn, 85% of the automotive sector is affected, especially as customers order vehicles that require more and more electronic equipment. And the year 2021 will undoubtedly remain a “dark year” for automobile production in Germany, with 2, 85 million cars assembled, the worst record since the year 94 in the midst of an oil crisis.

Less growth and more inflation

Not to mention that generalized shortages will weigh on the recovery of the German economy. In fact, in mid-December the Bundesbank lowered its growth forecast for the past year and the one to come largely because of the persistence of these shortages. For 2021, The German Central Bank expects growth of 2.5%, against 3.7% previously. And for 2022, the increase in GDP should be 4.2%, not 5.2%.

And this shortage should also fuel inflation across the Rhine. A particularly sensitive subject in the country, while in November prices increased as never before for nearly 23 years, in reaching 5.2% year-on-year.

However, “at least one in two companies plans to increase their prices over the next three months,” Klaus Wohlrabe recalls. This will not fail to undermine the purchasing power of the Germans in the process.