Germany’s Industrial Output Hit by Semiconductor Squeeze

Germany’s industrial output in May failed to impress analysts after recording a 0.3% fall. The economic indicator extended the decline incurred in April, which came at about the same percentage.

The actual result also dismayed analysts, who gave an average consensus of a 0.5% hike for the month.

In an explanation for the recent fall, the country’s economy ministry pointed out that the industry was hit very hard by the ongoing shortage of semiconductors.

Since late last year, there has been a steady increase in demand for global chips. This resulted in order outpacing supply at a higher rate than analysts expected.

Until today, the same dilemma retains its firm grip, thereby incapacitating important players in the industry.

In a more detailed look at the recent result, German capital goods production suffered from the shortage the most. This includes machinery and vehicle production, which declined by 3.4% during the same period. In contrast, intermediate goods and production output managed to clock in some gains in May.

Overall, German production is still down by 5% compared to its February 2020 level. It was during this time that the pandemic remained under control, and countries were still free from mobility restrictions.

Another risk that presents itself on the downside is the unprecedented boom in Covid cases in Germany.

The nation managed to keep the situation under control over the last two months after it emerged strongly from its draconian lockdowns. However, recent reports on Wednesday show almost 1,000 new infections. This translates to a 177 hike in cases compared to a week ago. Nevertheless, its vaccination program is likely to discount the risk. Currently, the country has a 90% vaccination rate among its over-60 population.

Germany’s Investor Sentiment Drops

Amid the successive economic setbacks, Germany’s investor sentiment stalls at a bigger-than-expected decline this month.

The latest survey shows that the morale fell to 63.3 points during the month from its close to an 80-point settlement in June.

Nevertheless, the level remains in the expansion territory, showing that business owners remain confident in the country’s growth pace.

According to an expert in the field, the economic development in Europe’s most powerful economy continues to normalize.

In a projection, economists see financial markets and economic indicators hitting positive territory over the remaining months of the year. It happens despite the ongoing risks surrounding the market today, primarily by the Delta variant, which has spread exponentially as of late.