“In my entire career, I haven’t experienced so many commodities at once, and I’ve been working in the same industry since 1996,” complains Thomas Nuernberger, sales manager at EBM Papst, a manufacturer of motors and fans.
During last year’s and this year’s lockdowns, Germany benefited from its focus on the manufacturing sector. Thus, the pandemic did not have as strong an impact on it as on other European service-oriented economies. Now, however, the German advantage is disappearing. Local companies do not have chips, containers, metals, paper, or even wooden pallets.
The Czechs will also feel the problem
Siemens chief electrical engineering giant Roland Busch has previously warned that the shortage of raw materials and increased transportation costs are likely to persist into the next fiscal year. Given the interconnectedness of German business and Czech business, it can be expected that the negative effects will also be felt by domestic companies.
“We also feel the lack of input material, such as plastic, and its rising prices,” Siemens spokeswoman for the Czech Republic Mariana Kellerová told the E15 daily.
“In addition, things are getting worse rather than better,” added economist Clemens Fuest, president of the Ifo Research Institute. According to him, more than two thirds of German companies have problems with imports. Factories produce about seven percent less goods than before the coronary crisis.
The largest German carmaker Volkswagen fell by nineteen percent in July. The missing parts subsequently forced the company to reduce production in several plants, including the largest in Wolfsburg, where 60,000 people work. The manufacturers of sportswear Adidas and Puma also acknowledge problems. They were hit by the closure of factories in Vietnam, where the pandemic situation worsened significantly over the summer.
The highest inflation in thirteen years
Macroeconomic data are not too optimistic either. German inflation accelerated from 3.1 to 3.4 percent in August. That’s how she got to the highest level in the last thirteen years and well above the objectives of the European Central Bank. The country’s gross domestic product is expected to grow by 3.6 percent this year. However, the German Federal Bank warned last week that this outlook may not be met precisely because of supply chain disruptions.
One of the important steps in preventing the crisis from deepening will, in Fuest’s view, be to continue vaccinating the population. “If the pace of vaccination slows down, we will have another problem,” Ifo chief told Bloomberg editors.
Despite dark predictions, some economists such as Holger Schmieding of Berenberg Bank believe that once supply chains recover, German companies, especially those in the automotive industry, can return to rapid growth.
Who will offer the solution?
It will certainly be interesting to see how the economic challenges are reflected in the forthcoming parliamentary elections. These will take place in Germany at the end of September, and so far it seems that Armin Laschet, the chairman of the government’s CDU, and the current finance minister Olaf Scholz (SPD) will fight for the seat of the next federal chancellor.
“Issues of economic development, especially their impact on the social issue, unemployment and social inequality, have traditionally played an important role. Since 2016, however, the significance has been around ten percent, the big election topics this year are more climate and pandemics followed by migration, “explains Vladimír Handl, an expert on German politics from Charles University.
However, according to the expert, the difficulties of German companies will certainly affect the electoral atmosphere and strengthen sensitivity to socio-economic issues. “It will be crucial for the elections which of the candidates for the office of chancellor will offer a solution to the given issues, which will be not only convincing, but also as gentle as possible in the impact on citizens,” says Handl.