Friday, December 03, 2021
The great lack
Economy and consumers in the bottleneck trap
Consumers and companies have to be more and more patient when it comes to goods and services. And if they find what they are looking for, they often have to dig much deeper into their pockets, because supply bottlenecks drive up prices. Where does the shortage cause the most problems? And how long does it last?
If you have to wait, that’s all well and good – you know that when ordering larger purchases such as cars, furniture or unusual items in online retail. But the fact that sometimes nothing is delivered or only delivered very late is almost a state of exception in the networked consumer society. Many people and companies are currently experiencing how the supply crisis continues to widen.
Several factors play a role: global freight traffic, production problems with various goods, more expensive raw materials and, last but not least, a lack of craftsmen and skilled workers. 2021 is a year of want. And a quick end to the bottlenecks is not in sight.
Longer deadlines, higher prices
Probably one of the most noticeable of the major deficiencies in everyday life is when going to the store or when clicking through the Internet shop. Consumers notice extended delivery times across almost all areas if the desired goods – as is so often the case – are not in stock. Many manufacturers and dealers have announced price increases, some of which have already been implemented.
It pinches every nook and cranny. Bicycle manufacturers and sellers report too few gears, steering systems and e-bike parts. The shortage of chips is a problem for electronics and computer retailers. According to the head of the Lower Saxony trade association, Mark Alexander Krack, things are getting tighter when it comes to sporting goods, for example: “These are all products that are affected by stagnant container traffic.” Customers should therefore find out about availabilities in good time. In the textile trade, some fashion collections arrive just as late.
The product selection will also be limited long after Christmas, said Klaus Wohlrabe from the Ifo Institute, summarizing the result of a survey among 1000 retailers. 60 percent complained of a lack of supplies. The German trade association assesses the situation similarly on the basis of its own survey. The majority of the members stated that they expected more or less large losses in sales by the end of the year 2021 due to the delivery problems.
Some suppliers ration delivery quantities
Hardware stores and building materials: It hardly looks any different here. “Many suppliers are canceling nationwide contracts with trading partners and are announcing massive price increases,” said the general manager of the DIY, building and gardening trade association, Peter Wüst. In some cases, delivery quantities would be rationed. In the furniture industry, a lack of chipboard and components slows down manufacturers, because wood and various metals are also in short supply. Wüst expects “clearly noticeable effects” for the markets for some time to come.
The ebb of materials also has a negative impact on the construction industry itself. Tim-Oliver Müller, General Manager of the Construction Industry Association, explained that this would lead “to enormous price increases, especially for timber, reinforcing steel and plastics. In current contracts, the construction companies have to shoulder these themselves.” Narrow yields would be further reduced, which could threaten the very existence of small companies. The companies are forced to “at least partially pass on higher material prices to the customers” for new contracts. Many a home builder or renovating do-it-yourselfer knows this from personal experience.
For tradespeople and skilled workers, even reaching deeper into their wallets does not help much – when there is simply no specialist staff. In the skilled trades, the shortage reaches the customer directly; in addition to the rise in prices, waiting times are increasing. Orders could often not be completed at the agreed time, announced the Central Association of German Crafts.
There is a lack of people everywhere
Despite thick order books, profits were lower than planned. There is not enough money for investments in future fields such as digitization or the transformation to a more sustainable business model “, it says. Criticism of the austerity measures of some public clients can also be heard.
And craft is by no means the only sector in which too few skilled workers are increasingly becoming a macroeconomic and social risk. Nursing staff, technicians, drivers, full-time employees in the hospitality industry – there is a lack of people in many places.
The situation on the automobile market, which is so important for the German economy, remains paradoxical. After the great Corona uncertainty in 2020, consumers and companies trust themselves to buy a new car again – but often there is no offer. Demand is building up, and waiting times are increasing here too. The Central Association of the German Motor Vehicle Industry recently spoke of a three to six month minimum for many models, and individual manufacturers are even with their delivery dates in the second half of 2022.
The main reason is the sluggish electronics supply. The carmakers have to put some of the blame on themselves: At the height of the slump in sales, they canceled contracts with chip manufacturers, which then had their own problems. Now they have to reduce their production. There are also heaps of half-finished vehicles.
Cars are not only becoming scarcer overall, but also existing semiconductor stocks are reserved for profitable models. Discounts for new cars are falling, used car prices are rising. VW, where deliveries in October were a third below the previous year, assumes that the chip crisis will last at least until mid-2022. At the same time, you can hardly keep up. “At the moment we have a bit of problems with availability,” said VW boss Herbert Diess recently.
Bottlenecks in industry, mechanical engineering and chemistry
Other core elements of German industry such as mechanical engineering and chemistry cannot escape the great shortage either. At the beginning of November, the Ifo researchers reported here and there a slight decrease in problems. “But we cannot speak of a relaxation,” said economist Klaus Wohlrabe. On average, companies calculated with difficulties over at least eight subsequent months, the chemical industry over ten months. The expectations in the food industry are somewhat less bleak.
Raw materials are becoming more expensive, for example basic metallic resources such as magnesium or aluminum, which are found in countless lightweight construction, electrical and intermediate products and are also required in the chemical industry. In the case of magnesium in particular, there have recently been sharp price jumps due to restrictions in the powerful producing country of China. The German Raw Materials Agency, which advises the federal government on the supply of strategically important basic materials, reported a similarly precarious delivery situation in other categories.
Speaking of China, tight transport capacities and the long journey: Beyond material and labor, global delivery traffic itself has become a proverbial bottleneck. For shipping, which has been starving for a long time, the freight boom may be a good thing – for customers who need stable transport routes after the broken Corona supply chain, the scarce containers mean new pressure. In the summer, terminals on the South China Sea had to temporarily close due to further corona cases. There were traffic jams in front of some large ports, while ships were absent elsewhere – with the consequence of dangerous delays for worldwide “just-in-time” production and delivery to consumers.