Global supply crisis is fueling German inflation | Business | Economic and financial news from a German point of view | DW
Germans who are considering buying a new car these days should dig deeper into their pockets, as rising prices in the auto industry have made vehicles € 360 ($ 416) more expensive on average than there was. some months.
“The decrease in the number of used cars on the market and the decline in manufacturer discounts recently caused the prices of the 30 best-selling cars to skyrocket as well as those of electric and hybrid cars,” said an automotive expert from Center Automotive. Research (CAR) of Duisburg. , Ferdinand Dudenhöffer, told DW.
However, the rise in showroom prices is mainly due to exploding costs in the automotive industry, he added, as a global semiconductor shortage weighed on the margins of the world’s automakers. whole. “The shortage of chips increases the net prices of cars and limits the ability of sellers to offer discounts to customers,” Dudenhöffer explained.
The global chip crisis is not only increasing the ex-factory prices of cars, it is even drastically reducing car production. A number of automakers have been forced to cut shifts or work hours in recent weeks.
The Italian-American auto giant Stellantis – a conglomerate of former US carmaker FiatChrysler and French group PSA – is a prime example. On Thursday, September 30, the company announced that its German subsidiary Opel is expected to stop producing cars at its plant in Eisenach, Germany, at least for the remainder of the year. Workers there would be put on hourly work schedules until the chip tightening eases, hopefully in early 2022, the company said.
Inflation hits its highest level since 1993
Delivery delays and parts shortages have driven prices up in various German industries beyond car manufacturing. Overall, German inflation in September jumped to 4.1%, according to preliminary figures, the biggest year-over-year increase in nearly 30 years.
The German Federal Statistical Office (Destatis) attributes the increase in part to so-called base effects resulting from a 3% reduction in sales tax adopted by the government in July 2020 to combat the economic slump of COVID-19 and falling energy prices during the pandemic. But global supply bottlenecks were also behind the spike in inflation, statisticians said.
While the lack of sufficient semiconductors weighs particularly heavily on industries like automotive and electronics, the construction sector suffers greatly from shortages of wood, steel and plastic. Prices have also exploded there.
Behind the global problems lies a massive mismatch between supply and demand caused by the COVID pandemic. After the establishment of vaccination campaigns in various industrialized countries and the relaxation of containment measures, economies are recovering from the crisis, with the demand for materials and goods increasing considerably.
At the same time, however, many manufacturers are still in crisis mode and are just starting to increase production. The difficulties in getting employees on leave back to work and the bottlenecks that still exist in some emerging market economies compound the current problems.
Sportswear maker Adidas, for example, is suffering from major production outages at its suppliers in Vietnam, as the Southeast Asian nation remains in the grip of the pandemic, with infections rising again. Desperate for deliveries, Adidas has announced that it is considering temporarily relocating part of its production outside Vietnam.
Vietnamese government reimposed drastic lockdown measures as infections rise again
Adidas’ rival Nike faces the same problem with Vietnamese manufacturers as the country has emerged as one of the biggest suppliers to the global fashion industry. Nike chief financial officer (CFO) Matt Friend said restarting production and restoring pre-crisis production levels would take months. Friend’s point of view was echoed by German company Puma which recently said in a press release that the entire global textile industry was affected by the pandemic situation in Vietnam.
The media also recently said that iPhone maker Apple may be facing delivery bottlenecks regarding its latest iPhone 13 model, suggesting that potential buyers should be prepared for a limited supply of the gadget in stores. .
Temporary or for longer?
A few months ago, central bank officials in the United States and Europe were still optimistic that the period of rising inflation induced by the pandemic would only be temporary, as the Fed chairman insisted, Jerome Powell, in July.
Central bankers like Jerome Powell are walking a tightrope in balancing rising inflation and post-pandemic demand
During this time, however, they no longer seemed so sure that the constraints of the global supply chain, which fuel inflation, could be corrected as soon as possible. European Central Bank (ECB) President Christine Lagarde said Wednesday (September 29) during an ECB forum that she was “concerned” that the end of bottlenecks – once considered by economists as in a few weeks – was “uncertain”.
“Supply bottlenecks and disruption of supply chains… seem to continue and in some industries to accelerate. I’m thinking here of shipping, cargo handling and things like that.” , she said.
And Jerome Powell, who was speaking alongside Lagarde, said it was “frustrating” to see supply chain problems “not improving”, but at the margin apparently “getting a little worse” .
“We see this probably continuing next year and holding inflation longer than we expected,” Powell added.
According to a recent survey carried out by the German think tank ifo, around 77% of industrial companies in this country have experienced bottlenecks and supply problems in securing raw materials and intermediate products. This was 7% more than in an ifo survey conducted the previous August.
“Supply side bottlenecks are tightening,” ifo poll director Klaus Wohlrabe noted in the institute’s September report. A glimmer of hope is emerging in the German construction sector, however, where the situation has calmed down somewhat, he added.
This article was adapted from German.