January 24, 2022

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Global Economy Bleak As Streams Of Data From Europe & Asia Suggest Growth Faltered

Data from Europe and Asia suggest that growth in the third quarter was slowed by global supply-chain bottlenecks, sharply accelerating inflation and the impact of the highly contagious Delta variant.

This has dimmed the outlook for the global economy.

As a result of congested ports and bottlenecks in the global supply chain for raw materials and components, manufacturers around the world have been rocked.

Some factories have had to shut down, while others have been warned that customers will be forced to wait for much-needed goods.

London-based economist David Oxley of Capital Economics believes that the reopening recovery was at its strongest earlier this year.

After shrinking in July, revised data released on Wednesday showed a modest increase in August for the United Kingdom, one of the few major economies to publish monthly GDP figures. In August, the British economy grew by 0.4 percent.

As Covid-19 restrictions in England were lifted in mid-July, the services sector grew at a fast pace in August, driving the overall economy.

Few jobs were created in manufacturing as factories struggled with supply-chain issues such as raw material shortages and skyrocketing energy prices.

C. Brandauer & Co. Ltd., a precision engineering firm based in Birmingham, England, makes metal connectors used in everything from electric kettles to medical devices and miniature military drones, according to Rowan Crozier, chief executive of C. Brandauer & Co. Ltd.

For the past few months, he has been telling his customers that they can expect to have to wait anywhere from 30 weeks to over a year to get their orders filled.

He claims that his suppliers are gradually increasing capacity, but he expects the shortage of raw materials to last until the spring before things start to ease up again.

The situation is improving, but Mr. Crozier cautioned that they were still far from out of the woods.

Due to a lack of truck drivers in the United Kingdom, the country’s busiest container port, Felixstowe, England, is experiencing bottlenecks.

Due to space constraints, A.P. Moeller-Maersk A/S has begun unloading U.K.-bound containers at other ports in the U.K. and Europe and returning them on smaller vessels to limit delays, according to a Maersk spokeswoman.

Will Bown paid a premium for a container to be sent from China by rail as shipping times increased over the summer, only for it to be stranded at the Hull port in the United Kingdom for three weeks.

His family’s business, SuperFOIL, brings insulation from Turkey, India, and China to the United Kingdom.

“We have kept up with demand, but we’re always on the verge of running out,” he explained.

The International Monetary Fund lowered its global economic growth forecast for 2021 from 6% to 5.9% this week, citing a deterioration in the outlook due to supply chains around the world struggling to keep up with soaring consumer demand in wealthy nations.

Data released on Wednesday showed that machinery orders in Japan fell by 2.4% in August, bucking the trend of rising orders. Manufacturers in Sweden and Germany are also feeling the pinch, according to new data.

As a result of freight issues and shortages that reduced manufacturing output by 4.5 percent, exports in Sweden fell by 3.8% in August, bringing the economy back down to pre-pandemic levels.

Volvo AB, the latest automaker to be harmed by a global shortage of semiconductors, stopped production in August.

As Covid-19 cases soared in Southeast Asia, where most chips are made, tested, and packaged, the chip shortage became more acute in the third quarter.

This year, NordiQ Group’s revenue in Sweden hit a record high of €30 million, despite shortages of certain components disrupting production at some of the car manufacturers it supplies with sheet metal, like Volvo.

According to CEO Stefan Ottosson, turnover could have been as much as 15% higher if not for the restrictions.

He already has a full order book for the following year, indicating that demand will remain strong. However, the rising steel price worries him.

There are “many dark clouds on the horizon,” according to Mr. Ottosson, despite the high volume and record turnover. As one person put it, “it’s like riding a roller coaster.”

With its export-focused businesses struggling with global supply-chain bottlenecks, rising energy prices, and a slowdown in China, Germany’s largest trading partner, the country’s economy is slowing sharply.

Germany’s industrial production fell by 4% in August from the previous month, according to data released this month by the federal statistics office.

The decline in vehicle and vehicle part production was blamed for the weakness, according to the report.

A shortage of semiconductors and power hit German automakers’ sales in China, the country’s largest market, in September, dropping them nearly 20% year over year.

Earlier this month, the German automaker Opel Automobile GmbH announced it would suspend production at its Eisenach plant in central Germany for the remainder of the year and place employees on leave.

There was a global shortage of semiconductors, according to the report’s sources.

A GM spokesman said production at the plant, which employs 1,300 people and builds the Grandland sport utility vehicle, will resume in the first quarter of 2022 if supply chain conditions permit.

On the other hand, KfW found that nearly half of Germany’s 3.8 million small and medium-sized businesses are having trouble with their supply chains.

Besides microprocessors, steel, aluminum, copper, and other metals, plastics and packaging materials, as well as timber for the construction and furniture industries, are also affected by the shortages, according to the bank.

Consumer spending has plummeted sharply, and IHS Markit projects that growth will slow to 1.4% in the third quarter, down from an average of 6.5% in the first half of 2021.

As a result of shocks such as sporadic outbreaks of Covid-19, widespread power shortages, and a cooling real estate market, China’s economy is also expected to slow rapidly in the third quarter.

According to a Wall Street Journal poll of 17 economists, China’s economy will grow by 5.1 percent year over year in the third quarter after expanding by 7.9 percent in the second quarter.

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