Made in Europe update

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A closely watched business survey shows that due to supply chain disruptions, the gap between the output of euro area manufacturers and the orders they receive from shoemakers to car companies has widened to a 24-year high.

Although European industrial companies report that IHS Markit’s monthly Purchasing Managers’ Index (PMI) activity continues to grow strongly Polls, They also complained about the interruption caused by the coronavirus pandemic, material shortages and delivery delays.

Due to shortages of many materials, including semiconductors, metals, plastics, and wood, manufacturers in the region—especially large automakers—have been struggling to keep up with growing global demand. The bottleneck of container transportation Also curled up the supply.

Chris Williamson, chief business economist at IHS Markit, said: “These supply problems are the main cause of manufacturing production shortages, and they exceed the 24-year record deficit set in July compared to orders of magnitude unrecorded before the survey.”

This has led to a rise in the prices of many manufactured goods, which rose by 2.7% in the year to August, leading to the recent Eurozone inflation 3% is the highest level in ten years.

These issues are affecting the recent rebound in Europe’s export-focused economy. The governor of the Bundesbank, Jens Weidmann, warned on Wednesday that “industrial production has been affected by supply bottlenecks for longer than originally thought” and said that this may mean that the Bundesbank will lower Germany’s economic growth this year. expected.

Large companies including Siemens and Volkswagen have warned that supply chain problems may continue into next year.

Volkswagen’s main factory with 60,000 employees in Wolfsburg resumed work in only one shift after the summer vacation, while Audi, BMW and Daimler have stopped production due to chip shortages and have sent thousands of workers home.Adidas and Puma were hit Vietnam factory closed Due to the limitation of fighting the rising levels of Covid-19 infection.

Frederik Ducrozet, an economist at Pictet Wealth Management, said that supply chain disruptions will push up about one-third of the price of the package used to calculate euro zone inflation, at least until next year. “The risk is that inflation expectations will be raised,” he said.

Williamson said that ex-factory prices “have risen sharply again”, albeit at a slower rate than in recent months. IHS Markit’s input price index is still at a high level at 87.0, but it is lower than the record of 89.2 in July.

Allianz economist Katharina Utermöhl said that once the economic rebound flattens out and the supply of key materials increases, the supply bottleneck should basically disappear. “Except for some important pockets such as chips, we don’t see the reason why supply can’t keep up with demand,” she said.

According to data from IHS Markit, Eurozone manufacturers responded to growing demand by adding more workers in August, continuing the trend of active job creation that began in February.

Data released by Eurostat on Wednesday showed that the number of unemployed persons in the euro zone fell by 350,000 to 12.3 million in July, bringing the euro zone unemployment rate to 7.6%. This rate is down from 8.5% last year, but still below the pre-pandemic low of 7.1%, and millions of workers on leave are excluded from these figures.

The overall PMI score of the Eurozone manufacturing industry fell to a six-month low of 61.4 in August, but it was still well above the 50 level, indicating that most companies reported an increase in activity from the previous month.

The activity of Italian and Spanish manufacturers increased at a higher rate, but the activity of German and French manufacturers slowed down, but still maintained a high level of growth. Williamson said: “Eurozone manufacturers reported that production increased by another month in August, maintaining rapid growth for the 14th consecutive month.”