bvdm Business Cycle Telegram October 2021: Supply Bottlenecks Dampen Company Expectations; Business Climate Index in Sideways Movement
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Despite the current supply problems for intermediate goods, the business climate in the German print and media industry remained relatively stable in October. The business climate index calculated by the German Printing and Media Industries Federation fell by a seasonally adjusted 0.3 percent compared with the previous month. At 103.6 points, the index has thus been above its pre-crisis level for four months now. However, due to the increasing shortage of materials, print and media companies are less confident about the future than they were in September. As a result, the expectations index is below its prior-year level for the first time since the beginning of the year.
While the print and media companies surveyed by the ifo Institute assessed their current business situation in October as better than in September, they were less confident than in the previous month with regard to their expected business development over the next six months. The values of the current and expected business situation determine the development of the business climate, which is a good leading indicator for the production development of the print and media industry.
In October, the seasonally adjusted business situation index rose by 2.6 percent compared with September and, at 102.7 points, is around 28 percent higher than in the same month of the previous year. The recent, visibly stronger development in demand made a significant contribution to capacity utilization rising to its highest level since October 2017. This now stands at 85.5 percent, around 3 percentage points above its long-term average. Despite this high level of production utilization, 87 percent of respondents are currently affected by production constraints. Whereas a year ago it was primarily the shortage of orders that was affecting companies, currently it is the shortage of materials and the shortage of skilled workers. Thus, 71 percent of the companies whose production is currently hampered cite the shortage of raw materials and intermediate goods as the central reason - an all-time high. Compared with the previous year, this represents an increase of 68 percentage points.
As a result, print and media companies are also currently less optimistic about their future business situation than in the previous month. In October, the seasonally adjusted index of business expectations fell by 3.2 percent compared to September. As a result, at 104.5 points, the index is below its year-earlier level for the first time since January 2021 - the decline amounts to 3.9 percent. Companies are evidently anticipating longer-lasting supply bottlenecks as well as associated price increases for intermediate products and are therefore planning to increase their selling prices on balance. Thus, 41 percent of the participants expect to increase their prices in the coming three months. Only around 4 percent expect a decrease. As a result, the balance is clearly in positive territory at around 37 percentage points, around 45 percentage points above the previous year's level.
