High demand, but no replenishment: Shortage of materials threatens economic upturn in Germany

Electronic chips, steel, paper - the list of missing preliminary products is getting longer and longer.

This is gradually becoming a problem for the German economy.

Berlin / Essen - According to economists, the lack of material in industry is slowing down German economic growth this year.

Research institutes therefore lowered their forecasts on Thursday.

The German Institute for Economic Research (DIW) is only expecting an increase in gross domestic product of 2.1 percent this year.

So far, the Berlin researchers had expected growth of 3.2 percent.

DIW: "German economic engine stutters"

The RWI Leibniz Institute for Economic Research in Essen is somewhat more optimistic, but has also lowered its growth forecast for the current year, from 3.7 percent to 3.5 percent.

"Delivery bottlenecks have hit some industries hard and are dampening the economic recovery," said RWI economic chief Torsten Schmidt.

Previously, the IWH in Halle had already significantly reduced its growth expectations for 2021 to 2.2 percent.

Global bottlenecks in intermediate goods did not allow the domestic industry to get going, despite strong domestic and international demand.

Although the world economy is humming, the German economic engine is stuttering, according to the DIW.

“It cannot be produced even though there is demand,” said DIW economic expert Simon Junker.

Accordingly, exports have lost momentum and are stagnating for the time being.

DIW: High inflation is harmless

However, the DIW researchers expect the production backlog to gradually resolve around the turn of the year.

Since the pandemic will increasingly be overcome from spring onwards, the service providers have also started to recover.

The economy is therefore expected to pick up by 4.9 percent in the coming year.

The DIW had previously forecast 4.3 percent.

RWI increased its growth forecast for 2022 from 4.7 percent to 4.9 percent.

Like many other economists and institutions, the DIW does not rate the higher inflation as worrying. The inflation is mainly due to special effects that should expire in the coming year. From 2022, inflation will fall to 2 percent and below. The Essen RWI expects a slightly higher price increase of 2.4 percent for 2022. In August, the inflation rate rose to 3.9 percent, its highest level since the end of 1993.