German government forecast: supply bottlenecks have a lasting impact on industry

Federal government forecast
Supply bottlenecks have a lasting impact on industry

Worldwide supply bottlenecks are creating problems for industry, including in Germany. The Ministry of Economic Affairs assumes that this will continue in the coming year. The automotive industry is hit particularly hard.

The federal government does not expect the supply bottlenecks for preliminary products and raw materials to end anytime soon. “Despite the high order backlog, the industrial economy is likely to be subdued into the coming year,” says the monthly report of the Ministry of Economic Affairs. “This is especially true for the heavy automotive industry, which is suffering from a shortage of semiconductors.” Despite a high global demand for German goods, the manufacturing industry is therefore not in a position to increase its output to a greater extent.

The service providers have recently benefited from the corona easing. “In view of the current pandemic, the risks have increased again,” warned the ministry at the same time. Nevertheless, the service economy should be able to compensate for the weakness in industry for the remainder of the year. “Overall, however, the gross domestic product should only increase slightly in the final quarter of the year,” the ministry expects. In the summer it was still enough to achieve strong growth of 1.8 percent. Some economists are even assuming stagnation in the current fourth quarter.

From the point of view of the union-related Institute for Macroeconomics and Business Cycle Research (IMK), however, the risk of recession has decreased despite the ongoing supply bottlenecks. For the period from November to the end of January, the IMK barometer shows a recession risk of 40.8 percent, after 44.1 percent in the previous month. The indicator bundles currently available data on the economic situation. IMK economic expert Peter Hohlfeld sees the figures as the first sign that the situation in the international supply chains is easing somewhat. “It is not yet possible to say with certainty whether the current data situation is already signaling a trend reversal in supply-side bottlenecks,” said the researcher.

Due to the weak end to the year, the federal government recently cut its forecast for economic growth in 2021, from 3.5 to 2.6 percent. In the coming year, the gross domestic product is expected to increase by 4.1 percent, after an increase of only 3.6 percent had previously been expected. The ministry expects inflation to ease, which at 4.5 percent is currently higher than it has been since 1993. “The shortages of raw materials and intermediate products are becoming increasingly noticeable here too,” says the monthly report. Since significant special factors such as the VAT cut will be eliminated in 2022, the inflation rate is likely to decrease noticeably.

source site-32

Leave a Reply