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The German economy is currently going through an extremely unusual phase: there are plenty of orders, but there is a lack of production capacity to process them.
It has probably never existed in this form, least of all to this extent.
We come from an era of almost unlimited supply. In the past few decades, practically all goods desires could be fulfilled without the prices having risen significantly. Globalization made it possible. If anything was lacking, other suppliers could be found somewhere in the world.
Suddenly everything is in short supply: steel, aluminum, computers, chips, paper, wood, bicycles and much more. The times of abundance seem to be over, shortages are noticeable in every corner. German industry in particular is complaining about a lack of deliveries of preliminary products and raw materials. And: contrary to the forecast, the situation is by no means easing. In November, three quarters of industrial companies said they were suffering from a lack of materials, as surveys by the Ifo Institute show. They do not expect the situation to improve fundamentally in the near future either.
My business motto for 2021 is therefore:
delivery bottlenecks.
The term focuses on the fact that we are dealing with new, possibly lasting challenges - and that state economic policy, on the other hand, cannot pull tried and tested recipes from the drawers.
Out of balance
In a typical recession, demand falls, leaving production capacity idle and people losing their jobs. Economic policy is now able to react effectively to this: central banks pump money into the markets, if necessary by bypassing the credit institutions; Governments and parliaments are using debt-financed means to support consumption and investment, to prevent layoffs and generally to alleviate general uncertainty. In the financial crisis of 2008/2009, the developed countries further developed this set of instruments. During the corona crisis, they used it last year with "Wumms" (Olaf Scholz).
But now we are dealing with completely different problems: The disturbances in the macroeconomic equilibrium come from the supply side, and the states have no quick solutions ready.
On the contrary, you have to make some very uncomfortable trade-offs.
At the moment, we keep hearing that the central banks cannot bring in oil, gas, wood or aluminum and should therefore not change their course as much as possible.
On the one hand, that's true.
On the other hand, the popular conclusion that stricter monetary policy will not do anything is at least arguable.
Because: As soon as it is clear that the production possibilities will remain limited in the long term, the central banks must, according to current teaching, quickly and decisively step on the brakes.
Otherwise, macroeconomic demand that overshoots supply possibilities leads to overheating and inflation.
But what if Omikron and the following virus variants also hit macroeconomic demand - because insecure citizens and companies keep their money together?
Then the central banks should actually continue to support the economy, not slow it down.
Economic policy is facing a balancing act that has not existed in this form before - and that is likely to become increasingly difficult in the years to come.
Scarce goods, rising prices
These are strange times.
According to the current economic pattern, as it has emerged in the past decades, the economy only reaches its capacity limits towards the end of a cycle, when a long upswing eventually comes to an end.
In the past decades, even in boom phases, rarely more than 15 percent of manufacturing companies were affected by supply problems.
It is currently 75 percent.
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Henrik Muller
Short-circuit policy: How permanent outrage destroys our democracy
Publisher: Piper
Number of pages: 256
Publisher: Piper
Number of pages: 256
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In general, everything is different this time: After a deep recession in the Corona year 2020, bottlenecks are now emerging very quickly.
There are three direct and two indirect reasons for this.
First the direct:
The corona crisis has led to business closings and transport failures around the globe, especially in air traffic.
Companies were so unsettled in the first phase of the pandemic that they shut down production, purchasing and stocks.
The demand has jumped surprisingly strongly, which was mainly due to the massive interventions of the central banks and finance ministers, which on this scale exceeded all previous economic stimulus programs in peacetime.
A limited supply meets an inflated demand: the results - shortages everywhere - are not in principle surprising, but they are in their violence. 90 percent of the companies complain about delivery bottlenecks among clothing manufacturers, and there are almost as many in the auto industry, according to the Ifo survey. In mechanical engineering 85 percent are affected by supply problems, in the food industry as much as 40 percent. One consequence: companies are raising prices. Two thirds of all companies surveyed want to demand surcharges from their customers in the next three months. In November, wholesale prices rose 16.6 percent over the previous year. The Federal Statistical Office has never before determined such a strong fluctuation in this time series.
And yet: One should expect these direct consequences of the pandemic to regress in the medium term.
Citizens and companies are pretty good at adapting to changing conditions.
But there are also two indirect effects that are likely to cause long-term bottlenecks.
Structural Shifts: Demography & Deglobalization
In the wake of the corona crisis, many employees left the labor market.
It looks like a lot of people have withdrawn from paid work permanently, for example because they are retiring earlier than originally planned.
A trend that can be seen across the more mature economies, including in Germany.
While many people, triggered by the experience of the pandemic, are rethinking their life plans, a demographic turnaround that can hardly be overestimated is taking place at the same time: From now on the potential of the labor force in Germany will decline - unless we get another surge of immigration or we work well into old age; both are likely to be difficult to implement politically for the time being. The consequence will be a chronic shortage of labor, and this shortage of people will increasingly hamper companies in their production capabilities.
Finally, the pandemic has also made companies realize how cracked their supply networks are.
In order to be more resilient to future crises, many companies are in the process of finding safe suppliers nearby - instead of cheap ones at the other end of the world.
Political tensions and trade disputes further promote this tendency towards deglobalization.
The international division of labor is being reversed to some extent.
This
makes delivery bottlenecks
all the more likely
.
If governments and parliaments want to make lasting changes to this, they have to work on the structures.
What else needs to be done
The focus is increasingly shifting to the supply side of the economy. This is not a question of ideology, but of economic requirements. Instead of continued stimulation of demand, the focus should be on structural reforms in the future. After all, the new federal government now wants to tackle the two major issues of digitization and decarbonization. But there are a lot of construction sites. For example: expand education, qualification and research; Push a stringent innovation policy including the development of the capital markets, enforce an open competitive order; flexible advancement of retirement for those who can and want to work; a forward-looking immigration and integration strategy. The list could go on and on.
But it is also clear that it will take a long time for such measures to take effect.
That is why we will
have to learn to live
with
delivery bottlenecks
for the time being.
The most important business dates of the week ahead
Open assembly area
Beijing -
Chinese money
- The Chinese central bank sets the key interest rate for short to medium-term loans.
Mainz -
Dirty Germany
- The verdict is expected in the infidelity and corruption process against the former mayor of the city of Oppenheim, Marcus Held.
The public prosecutor's office has requested two years and three months' imprisonment, and the defense pleads for an acquittal.
Expand Tuesday area
Nuremberg -
The mood at the turn of the year
- New data from GfK's consumer climate barometer.
Expand Wednesday area
Washington -
The
confidence in the United States
- results of a consumer survey in the US.
Expand Thursday area
Moscow -
The Vlad Show
- Russia's President Putin holds his grand annual press conference.
