German carmakers are also being hit by supply problems – particularly for semiconductors.
The IFO institute reports that conditions improved across Germany’s Automotive Industry, sending its gauge of business conditions to a two-year high.
Klaus Wohlrabe, Head of Surveys at ifo, declared that:
“Carmakers have now overcome the slump they suffered due to the coronavirus”
But while under 14% carmakers said lack of demand was a problem, more than half said the struggle to get hold of parts was leading to production restrictions.
At the moment, the main issue is problems with intermediate products, which were reported by 60.4 percent of the companies.
That figure compares to only 5.8 percent in July 2020; back in April 2020, it was as high as 42.0 percent. Several automotive plants have now announced they will introduce short-time work due to the shortage in silicon chips.
UK car factories have the same problem, of course, with both Jaguar Land Rover and Mini having to pause production last month.
Overnight, lumber prices hit a new record high, highlighting the squeeze on raw materials.
The spiraling demand for lumber – notably in the US – means a hefty bill for new home builders (as most new-build homes in America are wood framed). Ditto for those extending their homes, or even doing DIY jobs .
But it’s a boost for saw mill companies, who are raking in the profits, as supply simply can’t react fast enough to the economic rebound.
They are feasting on a glut of cheap pine trees in the U.S. South while their finished products like lumber and plywood are flying off hardware-store shelves and being bid up by home builders.
Lumber futures delivery later this month ended Monday at $1,575.60 per thousand board feet, a record and more than four times the typical price this time of year. Futures rose by the daily maximum allowed by the Chicago Mercantile Exchange during nine of April’s 21 trading sessions.
The FT flagged up last month that tariffs on Canadian lumber are another factor, as is a mountain pine beetle that has devastated forests in British Columbis.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
In normal times, too much demand is a nice challenge to deal with. But right now, supply chain bottlenecks are causing increasing problems for factories as the world economy recovers from the economic shock of the pandemic.
Shortages of everything from lumber to semiconductors is hitting manufacturers, and the situation seems to be getting worse amid rising demand.
Yesterday, the latest PMI survey from the US Institute for Supply Management (ISM) showed that these shortages were hitting growth, with factory activity rising at a slower pace in April. The ISM’s index of national factory activity fell to 60.7, from a 37-year high of 64.7 in March. That still showed decent growth, but weaker than expected.
The slowdown came because manufacturers are finding it hard to meet orders, as fiscal stimulus and vaccine rollouts in the US spur demand.
As Timothy Fiore, chair of the ISM’s manufacturing business survey committee, explained:
[Purchasing managers] “reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus impacts limiting availability of parts and material.”
Michael Pearce of Capital Economics says this squeeze is affecting almost every sector:
“What really stands out in the April report is just how broad the squeeze in supply of key commodities and intermediate inputs has become, with respondents’ comments suggesting supply shortages are affecting almost every industry.
That is reflected in the supplier deliveries time balance which, though it fell to 75.0 last month from 76.6, remains unusually elevated.”
This surge of demand has driven the Baltic Dry Index – which tracks the cost of moving raw materials – to its highest in over a decade last week.
The latest PMI survey of UK manufacturers, due this morning, will highlight how supply chains here are coping — as will new US factory order figures this afternoon.
Plus, the latest Bank of England mortgage data will probably show how the housing market remained strong in March.
- 9.30am BST: UK manufacturing PMI for April
- 9.30am BST: Bank of England consumer credit figures for March.
- 9.30am BST: UK mortgage approvals and lending for March
- 1.30pm BST: US balance of trade for March
- 3pm BST: US factory orders for March
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