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Post-Covid global economy is stalling due to inflation and supply chain problems

The outlook for the global economy clouded when a stream of data from Europe and Asia suggested that third quarter growth had stalled, hampered by global supply chain crunch, accelerated inflation and the effects of the highly contagious Delta variant.

From Sweden and the UK to Germany and J -an, blocked ports and bottlenecks in global raw material and component flows have rocked manufacturers, caused factories to stop production and warned executives they must wait for much-needed goods.

“The best reopening rebound probably came earlier this year,” said David Oxley, an economist with C -ital Economics in London.

Wednesday’s data showed the UK – one of the few major economies to release monthly gross domestic product figures – posted modest growth in August after revised figures showed it had contracted in July. UK GDP grew 0.4% in August.

The service sector was the main engine of growth in August when the British returned to restaurants, bars, hotels and theaters in mid-July after almost all Covid-19 restrictions in England ended.

The service sector was the main growth engine in the UK in August; a market in London in early September.


Chris J. Ratcliffe / Getty Images

The manufacturing sector contributed little to the expansion as factories faced supply chain challenges such as raw material shortages and high energy prices.

Rowan Crozier, Chief Executive of C. Brandauer & Co. Ltd. based in Birmingham, England – a precision engineering company that makes metal connectors used in kettles, medical devices and miniature military drones – said it has a well-stocked backlog, but metals and other raw materials cannot be delivered quickly enough, to meet demand.

It usually takes six to twelve weeks to fulfill an order, he said, but right now he is telling his customers that they may have to wait anywhere from 30 weeks to more than a year. He said his suppliers are slowly ramping up c -acity, but expects the pressures on raw materials won’t ease before spring.

“It’s getting better, but we’re not out of the woods yet,” said Mr Crozier.

A shortage of truck drivers in the UK has resulted in bottlenecks in the port of Felixstowe in England, the busiest container port in the country. The port has limited space for huge freighters, so  – Moeller-Maersk A / S recently started unloading containers for the UK in other ports in the UK and Europe and bringing them back on smaller vessels to limit delays, a Maersk said -Speaker.

With shipping times lengthening in the summer, Will Bown paid a premium for a container to be shipped from China by rail just to get stuck in the UK’s Hull port for three weeks. His family business SuperFOIL imports building materials such as insulation from Turkey, India and China to Great Britain.

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“We have more or less kept pace with demand, but we are constantly fluctuating, running out of stocks,” he said.

The International Monetary Fund has cut its 2021 growth forecast for the global economy from 6% to 5.9% this week.

In J -an, Wednesday data showed that machine orders fell 2.4% in August, contradicting expectations of an increase. Current data from Sweden and Germany also show the pressure on manufacturers.

Sweden’s economy contracted 3.8% month-on-month in August, back below its pre-pandemic level, as exports plummeted due to freight problems and bottlenecks that plunged manufacturing output by 4.5%.

Volvo AB ceased production in August, the youngest automaker to suffer the effects of a global semiconductor shortage. The chip squeeze intensified in the third quarter as Covid-19 cases increased in Southeast Asia, where most of the chips are manufactured, tested and packaged.

Volvo ceased production in August, the youngest automaker to suffer the effects of a global semiconductor shortage; a dealer in Stockholm in August.


Mikael Sjoberg / Bloomberg News

The sales of the Swedish NordiQ Group reached a record value of 30 million this year. Without these restrictions, sales might have been 10-15% higher, said CEO Stefan Ottosson.

The order books for next year are already full, which suggests that demand will remain strong, although he is concerned about rising steel prices. “You have very strong volumes, record sales, but at the same time a lot of dark clouds on the horizon,” said Ottosson. “It’s a little roller coaster ride.”


What can the third quarter numbers tell us about the long-term impact of Covid-19 on the economy? Join the conversation below.

Germany’s economy, the largest in Europe, is slowing sharply as its export-oriented companies gr -ple with global supply chain bottlenecks, rising energy prices and a slowdown in China, the country’s largest trading partner.

German industrial production fell by 4% in August compared to the previous month, announced the Federal Statistical Office this month. The driver of the weakness was a decline in the production of vehicles and vehicle parts. Auto sales in China, the largest market for German automakers, fell nearly 20% year over year in September due to semiconductor and power shortages, according to data released on Tuesday.

A shortage of truck drivers in the UK has resulted in bottlenecks in the port of Felixstowe; Ship containers in port on Wednesday.


Joe Giddens / Zuma Press

The German car manufacturer Opel Automobile GmbH announced at the end of September that it would cease operations at its Eisenach plant in central Germany until at least the end of the year and that it would take employees off. She blamed the global shortage of semiconductors.

Production at the plant, whose 1,300 workers build the Grandland sport-utility vehicle, will resume in early 2022 if the supply chain situation allows, a spokesman for the automaker said.

Almost half of the around 3.8 million small and medium-sized companies in Germany are currently struggling with supply chain problems, according to a survey by the state-owned German investment bank KfW in September. The shortage affects not only microprocessors, but also steel, aluminum, copper and other metals, plastics and packaging materials, as well as lumber and the furniture industry, the bank said.

In the US, growth is expected to slow to 1.4% in the third quarter, compared to an average of 6.5% in the first half of 2021, according to IHS Markit, who revised the figure downwards due to a sharp drop in consumer spending.

US consumer price inflation rose 0.4% month-on-month in September and was 5.4% higher than a year earlier, data from Wednesday showed, as shortages of goods and labor increased prices of food, new vehicles and furniture soared. Rising energy prices around the world have pushed up the price of gasoline and heating fuels. The IMF said this week that accelerated inflation posed a risk to the global recovery and urged central banks to be aware of the danger that price pressures could prove to be more lingering than they currently expect.

China’s economy is also likely to slow r -idly in the third quarter as the country suffered from unexpected shocks such as sporadic outbreaks of Covid-19, widespread power outages and a cooling real estate market. According to a Wall Street Journal poll of 17 economists, China’s economy will grow 5.1% in the third quarter after posting 7.9% growth in the second quarter.

Write to Jason Douglas at [email protected], Isabel Coles at [email protected] and Tom Fairless at [email protected]

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