According to data from the Central Bureau of Statistics, the shortage of semiconductors, wood and other raw materials hindered Germany’s industrial production in April, indicating that there are problems with the recovery of Europe’s largest economy.
According to Destatis, production in April was 1% lower than that in March, and according to revised data, it increased by 2.2% in March. The biggest decline was in the construction industry, which fell by 4.3%, and the production of consumer goods fell sharply, which fell by 3.3%.
The Ministry of Economy and Energy explained: “Following the increase in March, production in April slowed down slightly due to bottlenecks in the supply of raw materials (mainly semiconductors and construction timber).” They added that the situation should change in the next few months. The improvement is due to business environment indicators and stable demand.
Due to the relaxation of measures to combat the coronavirus pandemic and the decline in the number of infections, the expectations of German business leaders reached their highest level in two years in May. Affected by the decline in domestic demand, new orders fell slightly in April, while foreign demand increased by 2.7% from March.
Thomas Gitzel of VP Bank pointed out: “So far, we have not seen such a combination. The industry has ample orders and production is declining.” He explained that semiconductor supply problems have put pressure on the automotive industry. Gitzel estimates that this means that although the order has been completed, the industry’s contribution to overall economic growth in the second quarter is limited.
Andrew Kenningham of Capital Economics believes that chip shortages may continue to hinder recovery, but it won’t last long. Cunningham added that industrial production is expected to recover in May and June, which will increase activity in the second quarter by at least 1%.
German Chancellor Angela Merkel emphasized at the virtual opening ceremony of Bosch’s Dresden semiconductor factory on Monday that the shortage of chips in production has made the recovery of the German economy from the coronavirus crisis more complicated.
According to Reuters, the shortage has forced many German companies to recruit workers to participate in the national wage subsidy program and reduce production, which analysts estimate will drive price growth and increase inflationary pressures.