The Powerhouse Germany has a cloudy future due to global shortages.
Global shortages of industrial components and raw materials are putting a strain on Germany’s export-driven economy, potentially delaying the recovery from the coronavirus pandemic.
On Thursday, Germany’s top economic institutes (DIW, Ifo, IfW, IWH, and RWI) are anticipated to lower their growth forecasts for Europe’s largest economy.
When the think tanks released their biannual estimates in April, they estimated that GDP would expand by 3.7 percent in 2021, following a 4.9 percent contraction in 2020 due to the epidemic.
Shortages of resources and logistical bottlenecks have sucked the wind out of Germany’s sails since then.
The International Monetary Fund (IMF) reduced its own global economic estimates earlier this week, blaming supply chain disruptions.
In reaction to declining export data, Joachim Lang, the chairman of Germany’s influential industrial organization, the BDI, said last week that businesses should brace for a “tough autumn.”
“Whether it’s wood for pallets, packing materials, steel — an essential input for our industry — or computer chips, semiconductors,” Ralph Wiechers, chief economist at the mechanical engineering industry organization VDMA, told AFP, businesses were facing shortages across the board.
Customers’ orders have begun to decline among the companies Wiechers represents as a result of their inability to obtain materials.
“Why should they buy a plastic processing machine if they can’t access plastic supplies?” he said.
As the economy has deteriorated, a number of Germany’s highly watched economic indicators have turned red.
Last week, the federal statistics office Destatis announced that industrial production decreased by four percent month over month in August, while inbound orders fell by 7.7% following a record July.
Mechanical engineering was one of the most seriously hit areas, according to Wiechers, and shortages were having a knock-on effect on company production and profits.
Only Germany’s major automotive sector was more severely impacted by scarcity, which was exacerbated by a shortage of semiconductors, which are used in both conventional and electric automobiles.
According to the German monthly WirtschaftsWoche, production lines at Volkswagen, Opel, and Ford have come to a halt as bottlenecks tighten, while BMW and Mercedes-Benz have begun delivering vehicles with missing components.
Because of the slowing of production, retailers have had to deal with delivery issues as well. According to a poll conducted by the Munich-based Ifo institute, nearly 74% of businesses were affected, including bicycle dealers, DIY centers, and consumer electronics retailers.
Investor morale has plummeted as a result of the challenging situation. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.