On the way to the post-corona boom

German cars and machines are in demand again. Production expectations are better than they have been in 30 years. But delivery bottlenecks remain a problem – maybe even longer than expected.

German exports are booming.

Dhe order books of German industry continue to fill. According to the latest figures from the Federal Statistical Office, the order plus was last 3 percent within a month. After foreign business in particular boomed last year, domestic demand is now also picking up strongly. Sectors such as mechanical engineering and the electrical industry are doing particularly well. The order level of German industry is now 9 percent above the value of February 2020, the last month before the start of the Corona crisis.

But the flood of orders brings unexpected problems: The companies cannot keep up with production. Because industrial activity has long since picked up again in Asia and America, primary products such as chips, wood and plastic have become scarce and expensive. Almost half of all German industrial companies are now complaining about delivery bottlenecks, according to a recent survey by the Munich Ifo Institute – as many as last 30 years ago.

This has very practical consequences. Whether at Audi in Neckarsulm or the Ford plant in Cologne-Niehl – the production lines are increasingly standing still. The corona-plagued German economy is hit at the wrong time, the industry was last the Stability anchor; The gross domestic product (GDP) shrank by 1.7 percent in the first quarter compared to the final quarter of 2020, without robust industry the minus would have been significantly larger.

The gap between the order boom and production stagnation has long been evident in the official figures. As it became known on Friday, the industry cut back its production in February by 1.9 percent compared to January and thus even more than previously known. In March there was at least a slight increase of 0.7 percent. However, this could not change much in the overall balance sheet for the first quarter: While incoming orders increased significantly, production in German industry fell. It is still a long way from pre-crisis levels.

Industry had “inadequate provision”

“Production is now 9 percent below what the incoming orders suggest,” says Jörg Krämer, Commerzbank’s chief economist. “Such a discrepancy between production and incoming orders is rare.”

It is true that we keep hearing that the supply problems are of a short-term nature. But Krämer doesn’t think so. “Our customers report that it should stay that way in the coming months – maybe even into autumn. Only then should the sharp rise in incoming orders be reflected in a sharp rise in production. “

The industry itself apparently underestimated how quickly its sales opportunities recover after the Corona slump – “and therefore only inadequate provisions,” says Stefan Kooths, economic director at the Kiel Institute for the World Economy. In addition, there are delivery bottlenecks caused by accidents such as fires in chip factories or the accident in the Suez Canal and the imbalance in global container traffic. “As a result, industrial capacity is hampered on the production side and currently cannot keep up with the orders,” says Kooths.

If one bases oneself on the self-assessment of the companies, nevertheless the confidence dominates. According to survey results published by the Ifo Institute on Friday, the production expectations in industry are still pointing upwards: The indicator rose from 30.2 points in March to 33.1 points in April – that is the highest level since 1991. “The Order books are filling up, and there is still some catching up to do after the crisis year, ”says Ifo economist Klaus Wohlrabe. Almost all sectors announced production increases, particularly the electrical and automotive industries.