Manufacturers are facing a sharp increase in their costs – Les Échos

Will the rise in costs, which affects almost all manufacturers, derail the recovery? In September, German industrialists saw their costs climb 14.2% in one year. The country of the most powerful industry in Europe had not experienced such a pace since October 1974, that is to say after the first oil shock.

In France, the increase reached 10% and in China, 10.7% . In question: the increase in price of oil, metals , of electricity , maritime transport and various components, which are difficult to obtain today.

Worsening shortages in Europe

The question is to know what part of these costs will be passed on in selling prices, and will therefore feed inflation, and what part will be absorbed by corporate margins.

In the eurozone, “the average prices charged for goods and services have increased at a rate unmatched for more than twenty years, a trend which will undoubtedly have repercussions on consumer prices in the coming years. months, ”said Chris Williamson, chief economist at IHS Markit. All manufacturers want to rebuild their stocks and everyone wants to buy the same type of goods at the same time with the reopening of economies. Moreover, “the shortages, the supply difficulties and the transport problems worsened again in October”, according to IHS Markit .

But, “when we look at the long term, the producer price index is much more volatile than that of consumer prices,” said Bruno De Moura Fernandes, economist at Coface. “First, because the price of services, such as rents, for example, represents more than half of the calculation of inflation and the price of services is more stable. Then, if companies believe that the increase in costs is temporary, they tend to take this increase on their margins, ”he explains.

Risk for companies with low margins

So far, so good. “For the moment, in Europe, we can hardly see the consequences of supply difficulties and shortages in the consumer price index,” notes the Coface economist. With demand currently strong, companies may tend to view this period as an opportunity to gain market share, at least initially ”.

But the problems come. For Ludovic Subran, chief economist of Allianz, “the problem is that if the supply difficulties persist and the pressure on margins increases, then the credit risk will clearly rebound among the weakest of between them “.

We are not there yet, but it will not be long in coming, especially among automotive suppliers who are also facing the shutdown of production by their customers, the automobile manufacturers. “Supply shocks of external origin, as is the case today in value chains, are more often resolved by a drop in production than by a rise in prices”, estimates Gilles Moëc, chief executive officer. economist of Axa IM, which does not believe in a surge in inflation.

Towards an increase in inflation?

However, if the rise in industrial costs finally materializes in consumer prices, then central banks, whose objective of keeping inflation around 2%, will be called in the front line. With a problem. “Faced with a supply shock that creates inflation, central banks can not do much, as the consequences of this shock are not visible in the evolution of wages,” said Gilles Moëc. This may be what is happening in the United Kingdom where, faced with the resumption of inflation, the Bank of England plans to normalize its monetary policy and then increase its rates. With the risk of breaking demand and therefore the recovery without reducing inflation. It will be a test for other central banks, anxious to avoid the error of economic policy.

For manufacturers, however, there is hope. ” Yes the slowdown in the Chinese economy is confirmed, then inflation will deflate because the price of metals, wood, and other raw materials will fall again ”, judges Bruno De Moura Fernandes. This phenomenon is already visible on some metals . “The slowdown in the Chinese real estate market has led to a fall in the price of iron as housing starts decline,” note economists at the rating agency Fitch.