The original title: European "locomotive" stall: a drag on the supply chain crisis, "the German economy will decline sharply!"
Source: Wall Street
After being hit by the supply crisis, soaring energy prices and COVID-19 's relapse, Germany's business climate index deteriorated for the fourth month in a row in October, casting a shadow over the road to economic recovery.
The German business climate index fell to 97.7 in October from an upward revision of 98.9 in September, the lowest this year since April, the IFO said on Monday.
The Bundesbank released a grim economic outlook after a weaker-than-expected business confidence survey. In its regular monthly report on Monday, the Bundesbank said economic growth was likely to slow sharply in the fourth quarter. Meanwhile, the Bundesbank said Germany's economic growth in 2021 could be "significantly" lower than the 3.7 per cent it forecast in June.
The agency said:
"the manufacturing sector is likely to continue to suffer from delivery pressure, and the strength of the service sector is likely to weaken significantly."
Supply chain crisis hinders German recovery
As supply bottlenecks continue to depress factory output, many factories cannot operate at full capacity. Clemens Fuest, president of Ifo, said:
"supply problems are a headache for companies, causing capacity utilisation in the manufacturing sector to decline, hampering Germany's recovery."
This has hit the auto industry, one of Germany's pillar industries, particularly hard. Some economists believe that the impact of the semiconductor shortage on the auto industry is likely to last until next year, affecting growth in the coming months.
Thomas Gitzel, an economist at VP Bank, said:
"Today, the COVID-19 crisis has become a scarcity crisis, the supply chain is short of supplies, and the prices of natural gas and energy are soaring."
Klaus Wohlrabe, an economist at Ifo, said half of industrial companies plan to raise prices because of continuing supply problems, a record high in the survey. Higher commodity prices may disrupt the strength of the service sector and expose the German economy to the risk of stagnant growth.
The repeated epidemic situation makes the economy even more difficult.
Economists in the market have pointed out that rising COVID-19 infection rates in Germany could lead to a resumption of government restrictions on retailers, bars and restaurants in the winter months, which could disrupt the strong growth of the German service sector.
J oerg Kraemer, an economist at Commerzbank, said a few days ago:
Companies expect politicians to respond to the increase in novel coronavirus infection through new restrictions. "
At the same time, Kraemer added that repeated factory closures caused by the COVID-19 epidemic in Southeast Asia could further exacerbate material shortages in Germany.
A further worsening supply crisis may make the outlook for the German economy "even more difficult".