Persistent production gaps due to input bottlenecks

January 24, 2022

After the economic low point of the Corona crisis in spring 2020, the lack of advance payments has become a major brake on the upswing (Bardt et al., 2021a). Electronic components, building materials, metals, chemicals and paper - the list of primary products with delivery problems is long. In some cases, the necessary parts can be procured at higher prices so that the company's own production is kept running. The lack of semi-conductors and electronic components is particularly difficult for the automotive industry. Based on the production index, production there was around 50% below the level of 2018. This has an impact on other economic sectors through the diverse links, which in turn suffer from transport problems and production hindrances. After the production gap caused by the pandemic (compared to the annual average for 2019) for the entire German industry of a good 30% in spring 2020 was reduced to just under 4% by the end of 2020, it fell significantly again in the course of 2021 to around 10% grown. This production gap is offset by a still growing order backlog.

The causes of these disruptions in the international wholesale networks are diverse:

  • The surprisingly rapid recovery of the global economy after the low point in spring 2020 has led to a backlog. At the same time, supplier and value-added structures have to be reorganized after the sudden standstill in 2020 and the stop-and-go in the wake of the further waves of infection.
  • The ongoing global pandemic continues to disrupt international trade in goods, for example due to the closure of ports or the lack of ship crews. Individual incidents in logistics, such as the closure of the Suez Canal, meanwhile exacerbated the backlog. There are also direct production losses due to the pandemic.
  • A significant increase in demand on the market for semiconductors - due to a corona-related increase in demand for laptops, for example, and due to additional technological requirements for electric cars - meets with highly utilized supply capacities that can only be expanded in the medium term.
  • Temporary supply shortfalls, for example due to the fire in semiconductor factories in Asia or on the wood market after forest fires in the USA, have further exacerbated the bottlenecks.

These production problems at companies lead to supply bottlenecks in certain markets, higher production costs and, in some cases, higher sales prices. In the summer of 2021, around half of the companies saw high or medium opportunities for passing these higher production costs on to their sales prices (Bardt et al., 2021b). However, this also means that demand in these markets cannot fully recover from the restrictions imposed by the 2020 slump. On the other hand, the increases in production costs that cannot be passed on are at the expense of profitability and this is clearly dampening the recovery of investments. No progress has been observed in Germany since the third quarter of 2020 (Bardt et al., 2021a).