Europe's most powerful economy has been facing major production shortages in recent months. Germany, which relies heavily on its automobile production, has seen drastic shortages in basic materials needed for production. These shortages include more than just microchips, which the rest of the world is short in as well. Germany is facing issues with other manufacturing inputs such as lumber, metals, plastics, and battery materials.
Due to the shortages, German firms and officials are worried about a potential "bottleneck recession" if the supply chain is not reestablished soon. Due to the many orders for goods such as vehicles, prices have risen steeply, and at an unsustainable pace. Germany saw its highest inflation rate in three decades last August, and there is no end in site for this problem. Despite a small amount of firms moving production of inputs back into Germany or sourcing materials from a closer, more reliable location, most plants can not efficiently do this due to the costs that would arise. Although a new microchip plant is currently being built in Germany, production is still a long ways away, and when the factory is capable of producing, there is no guarantee they can source materials for production.
Source: https://www.nytimes.com/2021/10/05/business/germany-economy.html
2 comments:
Many countries around the world are experiencing supply chain issues for a variety of goods. It does not appear as if the supply chain issues will be fixed anytime soon and it does not seem like any country has a sure plan on how to combat this issue. With that being said I would consider the supply chain issue a market failure. Because it is a market failure I wonder if we will see more government intervention around the world to help fix this issue.
The supply chain crisis has left the world scrambling for solutions. Germany is just another country to join the list. The issue that everyone is worried about is the potential for a bottleneck. At some point, the supply chain will get back to normal, but no one knows the exact amount of time that it might take. The busiest time of the year is approaching rapidly. With everyone experiencing shortages and delays it will be interesting how this Christmas season turns out.
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