German Economy on the Brink as Auto Giants Hit by Supply Shock – ‘It’s Getting Worse’ | World | News

A global supply crisis threatens to derail Germany’s economic recovery, with the country’s auto industry suffering the biggest drop. Companies from BMW, Siemens AG and Volkswagen are all reporting a lack of supplies of materials, from the most basic wooden pallets to memory chips.

Thomas Nuernberger, managing director of sales at Germany-based Mulfingen, EBM Papst, a manufacturer of industrial fans, told Bloomberg: “In my career, we haven’t had a situation with so many commodities being in short supply. same time, and I’ve been processing the same materials since 1996.

“This is the toughest situation in the global supply chain that I have witnessed.”

He added, “I am counting on the fact that growth will be delayed until 2023, because even in 2022 we will still have problems with semiconductors and the container shipping turmoil will also last until 2022.”

German factories were still operating about 7% below their pre-pandemic level in June, according to Bloomberg Economics, with automakers and machinery makers particularly lagging behind.

Clemens Fuest, president of the Munich-based Ifo institute, said: “Things are getting worse rather than better.”

Siemens CEO Roland Busch also warned last month that global shortages of semiconductors and rising material costs could delay a recovery “until 2022”.

Volkswagen CEO Herbert Diess told Bloomberg TV that his company, Europe’s largest automaker, “will see some success in the third quarter as production is now very limited.”

The company’s global vehicle deliveries fell 19% in July.

Maeva Cousin, Senior Eurozone Economist at Bloomberg Economics, said: “Despite an increase in orders, Germany’s industrial recovery has been hampered by severe supply disruptions.

READ MORE: Eurozone on high alert as inflation hits highest level in nearly a decade

“We expect the industrial sector to start contributing positively to growth from the third quarter.

“It’s true that progress is likely to be gradual and bumpy, but as services continue to respond quickly to reopening, the impact on growth should be small.”

Benchmark German bond yields hit their highest level in more than five weeks on Tuesday after higher-than-expected inflation and an ECB policymaker called on the bank to scale back its emergency bond purchases as soon as next quarter.

Austria’s central bank governor Robert Holzmann said the bank was in a position where it could consider reducing purchases and added that he expected the issue to be discussed at the policy meeting. from the bank next week.

Angela Merkel’s tattered legacy ‘lost touch’ with her people [INSIGHT]
Merkel faces huge embarrassment as her party prepares to lose election [ANALYSIS]
German academics back out of a ‘soft’ eurozone [REACTION]

Banque de France Governor Francois Villeroy de Galhau also struck a more hawkish tone on Monday when he said the ECB should take into account the recent improvement in funding conditions when considering the future. pandemic-related purchases.

Holzmann’s call to start scaling back bond purchases follows data showing euro zone inflation rose to 3% year-on-year in August, the highest in a decade, well above the European Central Bank’s 2% target and a forecast of 2.7% by a Reuters poll.

Core inflation, a narrower reading that excludes volatile food and energy costs, also rose to 1.6%, compared with expectations of a 1.4% rise.

Germany’s 10-year yield, the eurozone benchmark, rose 5 basis points to a high of -0.383%, the highest since July 22.

Italian 10-year yields hit a high of 0.7050%, up 8 basis points, pushing the closely watched spread with German 10-year yields to 109 basis points.

“Holzmann definitely accelerated the rise in yields, but it started earlier in the day and continued afterward.

Inflation has been a factor, although I would say the immediate policy implications are limited,” said Antoine Bouvet, senior strategist at ING.