Supply problems hit German factory output

Global supply chain problems and a slump in overseas orders have been blamed for unexpectedly large slump in German manufacturing orders.

David Sapsted

6 July 2021

Data from the Federal Statistics Office on Tuesday showed that, in May, German factories suffered their steepest fall in orders since the onset of the first pandemic lockdown more than a year earlier, with manufacturing orders down by 3.7 per cent.Economists had been expecting a rise of about one per cent for the month but, although domestic orders had increased by 0.9 per cent, foreign orders slumped by 6.7 per cent, with orders from beyond the eurozone down by 9.3 per cent.Bloomberg reported: "Orders fell 3.7 per cent, worse than all estimates in a Bloomberg survey. The Economy Ministry said the slump was driven by weak export demand for cars following a steep rise the previous month."German companies are battling with unprecedented supply chain problems as a result of a sudden surge in global activity following the end of coronavirus lockdowns, a trend which is also driving up prices amid competition for inputs and raw materials. While some of those bottlenecks may have started to ease, it’s likely to take time for disruptions to pass."Germany’s car sector was particularly badly hit, primarily because of a global shortage of essential parts, most notably semiconductors.Thomas Gitzel, an economist at VP bank, said that a general shortage of raw materials had also contributed to the slump. “If companies are unable to process orders due to a lack of input materials, orders will not be placed at all,” he said.He added that it was also likely that strong demand at the height of the pandemic for goods such as furniture and healthcare products, was also slowing down and returning to more normal levels.