The business climate slowed once again significantly in Q3 against the prior quarter, falling to a level of just 87.6 points. This was not surprising given galloping inflation and the persisting problems in the supply chains, but it is worth taking a closer look at the sectors of trade and industry on the one hand and logistics services on the other. What we can see is a major difference in assessments of the current business situation: while the indicator for industry and trade continued to fall markedly, the downtrend among service providers was only small in scale. Above all, the indicator for the latter is still near the 100 mark and therefore on the same level as in the third quarter of 2019. This is likely due to catch-up effects following the tailbacks at the Asian ports and the still very high prices in the maritime shipping sector. The difficult situation in industry and trade, however, is also driving down future business expectations among the logistics service providers.
The findings of a flash poll among BVL members highlight the current challenges. The trade sector is suffering from the shortage of things like non-food items from Asia, semiconductors for IT products or semi-finished and finished goods like white goods or electric vehicles, and above all spare parts. Similarly, industry is being hit by a lack of semiconductors, battery cells and many electronic components as well as cables, castings and forgings. The situation with copper and steel is also critical, where a lack of supply, high energy requirements and sometimes long supply chains are having a negative impact. Other raw materials such as cobalt, silicon and rare earths are still anything but easy to procure and increasingly expensive. Moreover, exploding energy prices are damping both the business climate and business expectations in industry and trade. In some producing countries in Southeast Asia, energy shortages are already leading to government intervention and production caps.
The negative business expectations in industry and trade will likely result in falling demand for logistics services. Many companies have already boosted their stocking levels in order to increase their resilience to supply disruptions, and this will in turn lead to falling demand in the service sector. In contrast, the war in Ukraine is no longer such a major issue for logistics, in that the relevant supply chains have already been restructured. As a result, BVL members do not anticipate any further extraordinary disruptions. The sanctions against Russia, however, will continue to have an impact, first and foremost in the form of high energy prices.
Some the high absenteeism among logistics service providers caused by the corona pandemic is now being compounded by chronic personnel shortages, which in turn suggests that we will see prices rise further. These higher prices come on top of the general price increases in the production sector. Continued soaring inflation could prompt severe consumer restraint and could therefore result in a genuine recession. The new ifo surveys indicate at least a clear economic slowdown.