Industrial Production: Material shortage decreases somewhat

Status: 01/31/2022 1:02 p.m

The researchers at the ifo Institute see a slight easing in the supply bottlenecks in January, which have recently been a major problem for many industrial companies. However, there is still no talk of a trend reversal.

The corona pandemic has led to supply bottlenecks for raw materials and intermediate products in many industrial companies. However, according to a recent survey by the Munich ifo Institute, the situation eased slightly in January. A total of 67.3 percent of companies in the manufacturing sector reported problems with the procurement of raw materials and intermediate products in January. In December it was still 81.9 percent.

“Despite this development, companies still have many concerns,” said Klaus Wohlrabe, head of the ifo surveys. At least the companies now have the opportunity to work off the high order backlog and ramp up production. But it is too early to give the all-clear. “It is not yet clear whether this is a trend reversal,” says Wohlrabe.

Hardly any improvement in electronics

In detail, the ifo experts observe significant differences in the sectors: Among the manufacturers of electronic equipment, the number of companies affected by supply bottlenecks fell only slightly from 93.8 percent in December to 89.6 percent in January. In mechanical engineering, too, 80.6 percent of companies were still struggling with delivery bottlenecks in January, after 91 percent in December. For automakers, it was 77.9 percent in January, after 92.9 percent in December.

The situation for textile manufacturers has eased significantly. The number of companies affected fell from 87 to 44.6 percent. In January, only twelve percent of beverage manufacturers reported delivery bottlenecks.

Rising prices as a result

The ongoing shortage of materials in industry recently led to the German economy shrinking in the fourth quarter of last year, as supply bottlenecks are curbing production. Experts are not even ruling out a relapse into a recession. Another undesirable effect of material shortages is related to inflation. Bottlenecks in the supply of raw materials and preliminary products result in higher prices, which can also have an impact on the end products.

The US Federal Reserve has already announced that monetary policy will be tightened to combat high inflation. This week, the European Central Bank (ECB) will decide on future interest rate policy.

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