![]() ![]() Sources: Eurostat, European Commission and ECB staff calculations. This new development can be exploited to assess the degree to which supply bottlenecks are behind the weakness in euro area industrial production.Įuro area inventories relative to production expectations by sector and equipment and material shortages These bottlenecks caused material and/or equipment shortages that prevented euro area firms from being able to adequately respond to the rapid recovery in demand for manufacturing goods, which subsequently led to a fall in inventories across all sectors (Chart C). Since the second half of 2020, it is not only a strong demand that has triggered longer delivery times but also the supply bottlenecks that are causing severe delays, to the point of implying a decline in production (Chart B). Before the pandemic, the key mechanism at play was that an increase in demand would lead to an increase in production, delaying the delivery of goods to firms and lowering inventory levels however, an efficient allocation of resources thanks to globalisation would help to improve supply processes and speed up delivery times. Note: The latest observation is for June 2021.ĭuring normal times, increases in production are generally associated with longer suppliers’ delivery times and declining inventories. Sources: UNCTAD (United Nations Conference on Trade and Development) and ECB staff calculations. Median time in ports for container ships in the first half of 2021 against the 2018-19 average According to the ECB’s contacts in the corporate sector, both semiconductor foundry capacity and cargo vessel capacity are expected to remain tight into 2023. Another issue that exacerbated these supply bottlenecks was the renewed lockdown measures resulting from the spread of the Delta variant in some countries of the Asia-Pacific region (including Malaysia, Singapore, Thailand and Vietnam), which are key to the semiconductor chip production. Belgium, Italy and the Netherlands, on the other hand, all saw changes more in line with the global average (Chart A). 42% and 25% higher than their average in 20), thus standing even higher than those seen in the United States. In Europe, due to congestion, scheduling delays and infrastructure constraints, German and French ports saw a very large increase in average port stays (e.g. According to UNCTAD, the average time spent by container vessels in ports in the first half of 2021 was 11% higher compared with the pre-pandemic average in 2018-19. After the summer of 2020, once global demand had picked up again, the lack of containers to transport these goods from Asia to the United States and Europe, as well as numerous vessels arriving at their destinations well outside of schedule (exacerbated by the massive container ship that blocked the Suez Canal), led to considerable supply bottlenecks. With the collapse of world trade in April 2020, cargo ships were not able to run at full capacity and many containers were left to pile up in western countries’ ports due to the lockdowns. Equally relevant is that container vessel activity also sustained a major shock as a result of the pandemic. The global surge in high-tech demand from households needing to work from home and from firms needing to upgrade their internet capacity and network access, together with supply disruptions resulting from the coronavirus (COVID-19) pandemic, has generated a crisis in the supply of semiconductors, which has, in particular, adversely affected the automobile industry. The imbalance between the sharp recovery in global demand and the supply shortages has been more severe and protracted than initially expected. Global supply chain disruptions have been the result of the interplay of several factors, which can be grouped into five main categories: (i) early strong rebound in global demand for manufacturing goods (ii) supply shortages of specific semiconductors (iii) logistical disruptions in the transport sector, primarily linked to container vessel activity (iv) strict lockdown measures in some key Asian countries that produce intermediated inputs (v) time needed to increase supply capacity of semiconductor production and of vessels. Real GDP growth in 2021 was predominantly supported by a recovery in business services, while industry and construction have contributed to a lesser degree due to shortages of imported intermediated inputs and equipment. ![]() The euro area recovery over the course of 2021 has been affected by increasing global supply chain disruptions. Published as part of the ECB Economic Bulletin, Issue 8/2021. ![]()
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