ECB: ‘Impact of Supply Bottleneck Shocks Could Persist Through Much of 2022’
11 January 2022
By David Barwick – FRANKFURT (Econostream) – Supply constraints could continue to bedevil the euro area economy for most of the current year, the European Central Bank said on Tuesday.
In a pre-release from the eighth and last economic bulletin of 2021, due out Thursday, the ECB said: ‘The semiconductor shortages, negative pandemic developments in Asia and current congestion at container ports are unlikely to ease very much, suggesting that the euro area economy is expected to continue to be affected by these shocks over the coming months and that the impact of supply bottleneck shocks could persist through much of 2022, as also highlighted by the ECB’s contacts in the corporate sector.’
The ECB noted that European Commission business and consumer surveys showed expectations in October of an additional worsening of material shortages almost everywhere in the area.
‘The larger the share of respondents confirming that their businesses were affected by shortages compared with the respective long-term average, the larger the share of respondents that expected a further deterioration in their situation, which corroborates with the overall assessment of a prolonged and persistent impact from supply bottlenecks’, it said.
Home office-related demand for equipment along with disruptions directly stemming from the pandemic had led to a shortage of semiconductors, hurting the automotive industry in particular, the report said. Freight shipping had suffered a ‘major shock’ from the pandemic.
‘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’, it said.
Between October 2020 and last September, supply bottlenecks may have shaved a cumulative 2.6% off of Eurozone industrial production, reducing 2021 real GDP growth by 0.5%, the ECB said. ‘This estimate can be considered a lower bound, as supply bottlenecks continued to affect production in the last quarter of 2021, as well as construction and business services’, it added.