The industrial sector, which has not been affected by the restrictions as much as services, has a positive impact on the economic recovery in Poland, which is already beginning. Manufacturing is benefiting from increased demand, but is experiencing a significant increase in the prices of raw materials and components used in production, as well as a shortage of materials. The situation is not expected to improve in the near future, says Grzegorz Sielewicz, chief economist of Coface in Central and Eastern Europe.
“The global economic recovery began already in the middle of last year with the Chinese economy recovering from the pandemic collapse. The acceleration of global trade is beneficial for Polish exporters. In the crisis 2020, Polish exports decreased by only 0.3% compared to 2019. ., which was one of the better results compared to other EU countries.In Q1 2021, exports of goods from Poland increased by over 10% compared to Q1 last year. Moreover, Polish companies are increasingly involved in global production chains However, the quick recovery in global trade resulted in higher demand for certain raw materials and means used in production, which increased their prices, and also led to difficulties in obtaining some components “- wrote Sielewicz in the publication entitled “Supply barriers hinder the economic recovery in Poland. The costs will be borne by consumers.”
He pointed out that higher costs of materials as input for production are confirmed by statistical data. The sold industrial output price index has remained in an upward trend since September last year, and the latest data indicated its significant acceleration – in March 2021, sold industrial output prices increased compared to February this year. by 1.3%, and compared to the same month of the previous year – by 3.9%. However, in April 2021 they increased by 5.3% compared to April 2020.
“The first positive news about the possibility of introducing the COVID-19 vaccine at the end of October 2020 sparked great optimism regarding the acceleration of the economic recovery. In four months the price of a barrel of Brent crude oil increased by more than 80%. As a result, fuel prices increased and the total price increased. Transport costs increased in world trade, important shipping, in this case due not only to higher oil prices but also to a lack of containers, so many companies chose to use air and rail transport, but higher demand for these services also increased them. price, ” noted the economist.
Economic surveys, such as the PMI index for industry in Poland, confirm that despite the improvement in economic conditions, shortages in the supply of raw materials are driving the inflation of costs and prices of finished goods. The shortages result in a record accumulation of production backlogs, and the previously accumulated stocks were sold out, Sielewicz also pointed out.
“As a result, the main factor limiting the development of the industrial sector in Poland is disruptions in the supply chains. According to the components of the PMI index, the record-breaking increase in delivery times compared to historical research reflected bottlenecks in transport. In the latest survey, conducted in April 2021, approximately 44% of respondents reported greater delays in deliveries than in the previous month. And this percentage was already high in March (37%), and also exceeded the figure recorded a year earlier, during the first lockdown, “the publication reads.
As the economist notes, semiconductors are an obvious example of the current global shortages of components used in production. Since the beginning of the year, these shortages have been particularly visible in the automotive industry, but have also affected other sectors. The current situation is caused by several factors. First, continuous innovation in the automotive sector increasingly requires the use of semiconductors. Therefore, it is estimated that electronic parts currently account for around 40% of the cost of an internal combustion engine car, making the car industry as dependent on ICs as the electronics industry.
“At the start of the pandemic, car makers reduced their semiconductor orders as they expected sales to decline due to lower demand and a halt to production in automotive factories. Integrated circuit makers switched their production lines to processors for consumer electronics as demand for teleworking devices surged, This pandemic confirms how strategic ICT products have become.The COVID-19 pandemic has accelerated the demand for semiconductors, and many industries and activities, from food delivery to automotive applications, have accelerated increasingly require integrated circuits and the use of digitization and therefore the use of semiconductors. The difference between global semiconductor demand and supply constraints is likely to keep the shortages at least until after from the beginning of next year “- explains Sielewicz.
Many companies around the world have very limited inventories in the ongoing economic recovery phase. This situation contributes to an increase in an already tight supply chain, due to the strong demand mentioned above from sectors requiring semiconductors. As a result, it takes time for their producers to keep up with high global demand, even increasing their production capacity, he stressed.
“It is expected that this shortage should become less severe in early 2022, mainly due to two factors. Semiconductors have become a key strategic product, high in the strategy of producer countries, especially in the context of the innovation race between the United States, and China “- he added.
He also noted that the shortage of semiconductors is one of the examples that companies are currently facing.
“Likewise, commodity prices and transport costs will not return to levels from a year ago. However, there is limited scope for further, especially as dynamic as in previous months, increases in costs incurred. Production prices will stabilize at higher levels, and supply constraints will gradually fade away. However, in the face of economic acceleration, companies will more and more boldly transfer production costs to end consumers. In the coming months this will be a factor that will be reflected in consumer inflation “- summarized Coface chief economist in Central and Eastern Europe.
Source: ISBnews and Coface
