Ifo: Material consumption slows down industrial production and drives consumer prices

With a view to production, growing material shortages are slowing down production immediately, however with available material it only slowly rises back to the previous level. “immediate relaxation in material availability is therefore not enough to compensate to production losses,” says Ifo researcher Friederike Fourné. Two years after a negative shock, manufacturing production is still 0.5 percent below the level that would have occurred in a scenario without material bottleneck shock.

Producer prices and commodity prices are reaching their strongest price increases about a year after the shock, at about 0.3 percent (producer prices) and 0.6 percent (commodity prices). The material shortage in consumer prices remains noticeable the longest. Even two years after the shortages, consumer prices are rising by around 0.1 percentage points per quarter.

The authors consumption the monthly ifo company surveys in the manufacturing sector to the period 2002 to mid-2025. Between 2,000 and 5,000 companies conclusion the survey every month. The study only looks at unexpected and immediate shocks from material shortages. The impact of these shocks was examined with regard to manufacturing production, producer price index, commodity price index and consumer price index.