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German slowdown sends global warning signals to supply chains and China

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German slowdown sends global warning signals to supply chains and China

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FRANKFURT — The German economy slowed at the end of last year as the strength of exports was hit by bottlenecks in the global supply chain, soaring material prices and weak manufacturing. biggest trading partner, China.

With its disproportionate dependence on global trade and the critical role it plays in global supply chains, the German economy has become a barometer for a number of global issues, including rising prices of gas. energy, the slowdown in China and supply chain disruptions. More than that, the German industry, especially its huge auto sector, is grappling with both technological upheaval and fiercer competition from its Chinese competitors.

The softness in Germany, which represents nearly a third of the production of the euro zone, weighs on the recovery of the continent after the Covid-19 pandemic. It contrasts with the muscle growth in the United States at the end of last year, according to estimates from the Federal Reserve Bank of Atlanta.

The German economy likely shrank 0.5% to 1% quarter-on-quarter between September and December, the Federal Statistics Agency said at a press conference on Friday. Germany is the first major economy to give a preliminary estimate of its 2021 gross domestic product.

For 2021 as a whole, German GDP grew by around 2.7% year-on-year, leaving it 2% below its 2019 level. This compares to an estimated growth of 5% for the entire region. eurozone and 5.8% for the United States last year, the agency said.

At a press conference on Friday, Georg Thiel, chairman of the German Federal Statistics Agency, blamed the weak recovery on social restrictions aimed at containing the virus, which have dampened consumer spending, as well as bottlenecks. delivery bottlenecks and equipment shortages.

Even the UK, affected by the hardening of trade relations after Brexit, has recently seen solid growth. Its economy grew 0.9% month-on-month in November, propelling economic output above its pre-pandemic level, the UK’s national statistics office said on Friday. The German economy was still 1% below its pre-pandemic level late last year, while the United States surpassed that level in the middle of last year, according to Capital Economics.

Germany suffers from its dependence on exports, which support about 30% of German jobs, or about four times the share of the United States. German manufacturers are struggling to find parts and labor to produce cars and machines. They are facing soaring energy prices which is pushing up electricity bills even further.

They are also being stifled by the slowdown in China, Germany’s largest trading partner in 2020 and a major buyer of German machine tools and cars. German exports to China fell 4.2% in November year-on-year to € 8.9 billion, or € 10.2 billion, while exports to the United States jumped by about 15% to 11 billion euros, according to the federal statistics agency.

Meanwhile, the big German automakers are investing heavily in new technologies that they hope will allow them to switch to cleaner, battery-powered vehicles.

Consumer prices in Germany rose at their fastest pace in nearly three decades in December.


Lu Yang / Zuma Press

At Hella, a large automotive supplier based in northwestern Germany, sales fell around 12% in the three months to November year-on-year, to € 1.5 billion. The company blamed the massive bottlenecks in the supply of electronic components on Thursday.

Hella chief executive Rolf Breidenbach said he expects component shortages to persist until 2023. “The coronavirus pandemic continues to cause considerable uncertainty,” Breidenbach said.

The company’s adjusted profits fell about 42% year-on-year in the six months to November, before interest and taxes. Profit was affected by falling sales and rising logistics and material costs, as well as greater inefficiency in production, the company said.

At Volkswagen AG

, global vehicle deliveries fell by almost a third in the three months to December, to around 1.9 million.

Sales in China, its largest single market, were particularly weak, falling by around 37% year-on-year in the last quarter of 2021 to around 755,000. Its sales in North America held up better, down 14% in the fourth quarter of 2021 but up 16% over the whole of last year.

The company said it plans to increase capital spending and development spending on electric vehicles by about 50 percent in the five years to 2026 from the previous period, to $ 52 billion. ‘euros.

German authorities have tightened social restrictions in recent months amid a massive new wave of Covid-19 infections and deaths linked to the Omicron variant. This weighs on retail sales, which fell about 3% in November after adjusting for inflation, according to the statistics agency.

One in seven German companies fears for its existence, according to a recent survey by the think tank Ifo. Meanwhile, German inflation jumped to 5.3% in December, its highest level in nearly three decades and well above the European Central Bank’s 2% target.

As economic activity has slowed, German companies are putting more workers back on leave.

The number of workers on leave in Germany rose to 879,000 in December, or 2.6% of the working population, against 712,000 the previous month, according to Ifo.

“The increase in coronavirus cases has increased short-time working in the hotel industry and retail in particular,” said Sebastian Link, researcher at Ifo.

In the manufacturing sector, the number fell from 381,000 to 390,000 people, or 5.6% of all workers. “This is due to an increase in supply bottlenecks,” Mr. Link said.

Write to Tom Fairless at

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German slowdown sends global warning signals to supply chains and China

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