German industrial output is facing a resurgence of supply chain bottlenecks, raising concerns about the sector’s long-term resilience and potentially impacting broader economic stability. A recent survey by the Ifo Institute revealed that 11.2% of companies are now experiencing difficulties securing necessary raw materials – a dramatic increase from 5.5% in October. Klaus Wohlrabe, head of Ifo’s surveys, directly attributed the escalating crisis to the ongoing shortage of semiconductors, exacerbating pre-existing pressures on manufacturing.
The automotive industry is bearing the brunt of this disruption. Over a quarter (27.6%) of automotive firms are now reporting supply chain issues, a stark contrast to the less than 1% recorded just months prior. This is leading to production slowdowns and potentially hindering Germany’s transition to electric mobility, a key government policy goal. Manufacturers of electronic and optical products and those producing electrical equipment, are also experiencing heightened difficulties, with problem rates jumping significantly.
While the current predicament isn’t as severe as the peak crisis of December 2021, when a crippling 81.9% of firms struggled with material shortages, the rapid escalation since October is deeply concerning. The current level echoes the high of 12.4% seen in April 2024, demonstrating a worrying trend.
The return of supply chain woes casts a critical light on Germany’s industrial dependence on global supply chains, especially for vital components like semiconductors. Critics argue that the government has been slow to implement strategies to bolster domestic chip production and reduce reliance on foreign suppliers. This renewed vulnerability underscores the need for a more proactive and strategic approach to industrial policy, potentially including significant investment in reshoring capabilities and fostering greater regional cooperation to secure critical supply chains, beyond short-term reactive measures. The longer these bottlenecks persist, the more likely further distortions within the manufacturing sector and broader economic headwinds become unavoidable.
