German industry again suffered from disrupted supply chains in October

by David Fleschen

Widespread supply bottlenecks continued to be the biggest problem for German manufacturers at the start of the fourth quarter. This is confirmed by the seasonally adjusted IHS Markit/BME Purchasing Managers Index (EMI), which stood at 57.8 points in October, down from 58.4 the previous month. Even though it is the lowest value in nine months, the important leading indicator for Europe's largest economy is thus still comfortably in the growth zone.

"The EMI has already held well above the reference line of 50 points for 16 months. This speaks for the robustness of German industry. At the same time, however, we are also observing that production is increasingly stalling due to the shortage of raw materials on the markets, capacity bottlenecks at suppliers and ongoing transport problems," emphasized Gundula Ullah, Chairwoman of the Board of Management of the German Association of Materials Management, Purchasing and Logistics (BME). (BME), on Thursday in Eschborn. Therefore, it is not surprising that many manufacturers are more pessimistic about the near future, she added. "This is visible in the annual outlook sub-index, which has now fallen to its lowest level since August 2020," Ms. Ullah concluded.

"The EMI shows it quite clearly: the mood in German industry continues to deteriorate," commented Dr. Gertrud R. Traud, chief economist at Helaba Landesbank Hessen-Thüringen, in response to a BME query on Thursday about the latest EMI data. But it is not a lack of demand that is causing problems for companies, it is the supply side. There are problems and bottlenecks everywhere. This will drag on well into next year, he said, because pent-up demand will keep it high. "The good thing is that growth continues to get impetus from the demand side. The bad thing is that prices will continue to rise," the Helaba bank director added in her statement for BME.

"Supply bottlenecks, energy prices and corona hazards are weighing on the economy," Dr. Ulrich Kater, chief economist at DekaBank, told BME on Thursday. In the fourth quarter, therefore, only a weak increase in gross domestic product is expected, after it was still able to grow strongly in the summer. Kater: "However, it will probably only be a dent in the economy, not an engine failure."

"The recovery process of the German economy has weakened considerably. For example, among energy- and raw material-intensive intermediate goods manufacturers, business expectations have dimmed due to rising energy prices and raw material bottlenecks. This is confirmed by the latest DIHK business survey. In addition, the shortage of skilled labor has returned as a key business risk. In view of the immense challenges, the DIHK estimates that we will not reach the pre-crisis level until after the third quarter of 2022," DIHK economic expert Jupp Zenzen told BME on Thursday.

Dr. Heinz-Jürgen Büchner, Managing Director Industrials, Automotive & Services at IKB Deutsche Industriebank AG, gave the following assessment to BME on Thursday regarding the latest development of the EMI sub-index purchase prices: "The shortage of several raw materials continues. Although global primary aluminum production increased by 4.4 percent to 45.1 million tons by the end of September 2021, the market is not yet balanced. The reduction of primary aluminum inventories on the exchanges continued in October. Above all, possible supply bottlenecks from China as a result of energy shutdowns, which could also have a negative impact on the global supply of magnesium, are weighing on the market. Although prices declined at the end of October, quotations for primary and recycled aluminum continued to rise on a monthly average. Market supplies of aluminum are expected to remain tight in 2022."

Source: BME, Photo: Fotolia

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