BlackRock Investment Institute

Macro insights

Nov 22, 2021

Short on equipment, short on people

Supply chain disruptions have worsened around the world, pushing up inflation sharply and likely weighing on growth ahead. More than half of euro area manufacturing firms say equipment shortages are a material constraint on production, as the yellow line in the chart shows. In contrast to the U.S., labor shortages are less of an issue, though still affecting over a fifth. This is partly driven by different labor approaches during the pandemic, with the U.S. opting for lay-offs and the euro area for furlough schemes.

More acute in Germany

Chart showing rising equipment and labor shortages in the euro area

Sources: BlackRock Investment Institute, European Commission with data from Haver Analytics and ISM, November 2021. Notes: The chart shows the share of companies reporting that equipment or labor shortages are constraining production in the European Commission quarterly manufacturing survey.

Within the euro area, shortages are more acute in Germany and less so in Italy and Spain. Why? Likely because the auto industry – a sector that’s very exposed to semiconductor shortages – makes up a larger share of Germany’s manufacturing output.

We see these supply bottlenecks easing next year and reducing the pressure on prices. We expect euro area inflation to fall back below 2% in the medium term, making a rate increase next year by the European Central Bank unlikely

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Elga Bartsch
Elga Bartsch
Head of Macro Research
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Nicholas Fawcett
Nicholas Fawcett
Macro Research

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