How the shortage of materials is slowing the German economy

How the shortage of materials is slowing the German economy

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How the shortage of materials is slowing the German economy

Berlin – At first glance it seems paradoxical. The economy in Germany is picking up, the order books in the construction industry are full – and yet the industry is hardly moving. Because: Supply bottlenecks for materials and rising prices are increasingly burdening companies.

Consumers who need a craftsman currently have to be prepared for waiting times of around two months. “It takes an average of 8.8 weeks to build and expand,” said Hans Peter Wollseifer, President of the Craftsmen’s trade, to the newspapers of the Funke media group. The main reason for scarcity and rising prices is the pandemic.

Corona has messed up the supply chains. At the height of the crisis, many companies cut production capacities. It now takes longer to start up. At the same time, the global economy – driven primarily by the USA and China – is picking up speed. So the demand is increasing. And with it the willingness to pay higher prices.

“Building materials are scarce and the material prices have risen exorbitantly,” says handicraft president Wollseifer. “There is a lack of wood, metal, plastic, chips – practically everything that is needed for household use.”

And the material problem on German construction sites is getting worse. As the Ifo Institute announced on Thursday, 50.4 percent of companies in building construction reported problems with the procurement of building materials. For comparison: In April the value was 23.9 percent and in March 5.6 percent. The situation in civil engineering is somewhat better, but also tense overall. 40.5 percent of the companies reported delivery bottlenecks – but here too the value in April was significantly lower at 11.5 percent.

“Capacity utilization in the industry is still high. But more and more companies are worried about the delivery bottlenecks, ”says Ifo expert Felix Leiss. And where the supply falls, the price rises. For steel, sawn timber and other wood-based raw materials, Leiss already speaks of “sometimes dramatic price movements”. The price of steel has more than doubled within a year. The ton last cost around 1400 euros.

The German Steel and Metalworking Association (WSM) is concerned about the current bottlenecks on the world market. It is said that one has never experienced such a situation. “Our member companies have to put off their customers more and more often because we lack the steel,” said WSM General Manager Christian Vietmeyer of the Handelsblatt. “This means that construction sites have to be shut down temporarily.”

It doesn’t look much better with wood. The price for the cubic meter has already reached values ​​of 400 euros – before the pandemic, it peaked at less than 200 euros. From a global perspective, wood is in short supply. In the USA, forest fires and the restrictive customs policy of ex-President Trump have tightened the supply. At the same time, Russia has also imposed a ban on the export of raw wood to China. So Beijing is covering up in other ways – and buying the German market empty. As the Federal Statistical Office has determined, timber exports rose by 43 percent in 2020. A trend that is likely to intensify – also thanks to the good economic situation.

The International Monetary Fund (IMF) assumes that the global economy will grow strongly this year by six percent. This will further fuel the demand for raw materials. For the USA, which is still the world’s most important economy, the IMF is even predicting the strongest economic boom in 40 years. If President Joe Biden enforces his expensive infrastructure program, American economic output could increase by seven percent. For Germany, the Bundesbank expects economic growth of 3.7 percent this year, 0.7 percentage points more than forecast in December. “This summer economic output could have reached the pre-crisis level again,” says Bundesbank President Jens Weidmann.

Material shortage: asset manager already speaks of a “game changer”

Consumers are increasingly feeling the catch-up effects of the pandemic and global trends – through shortages and rising prices. It doesn’t matter whether it’s steel, wood, copper, plastic, chips or iron ore: demand is high everywhere. And nowhere does the offer keep pace. Some market observers and investors are already talking about a new super cycle for raw materials, i.e. a trend of rising prices that has lasted for many years. The asset manager Unigestion wants to have recognized a “game changer” in Corona year 2020.

Dr. Fritzi Köhler-Geib disagrees. In an interview with the 3sat business magazine macro, the chief economist of the state-owned KfW bank said that the price level for a super cycle is still too low. There is much to be said for an economic effect. The economist is also calm when it comes to inflation. Rising energy prices and the increase in value-added tax are driving the rate of inflation on a one-off basis.

Of course, none of this changes the lack of material. And the trade has other problems to contend with. The President of Craftsmen Wollseifer announced a project for the autumn to become more attractive to women as an industry. Only around 20 percent of trainees are female. The open apprenticeship positions are also causing problems for the industry. Over 30,000 apprenticeship positions have not yet been filled. In the end, it’s not just raw materials that count. But also people who create something out of it.

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