Informations Rapides · 21 October 2021 · n° 271

In October 2021, demand in manufacturing has remained strong but sourcing difficulties have become widespread Quarterly business survey (goods-producing industries) - October 2021

In October 2021, the balances of opinion of manufacturers related to the demand they receive has remained at a high level. The proportion of companies declaring that they are limited in their production because of a lack of demand only has indeed diminished a lot compared to last July. However, even more enterprises than in July have reported experiencing supply difficulties. The proportion of enterprises whose production has been limited by sourcing difficulties has reached 45%, a level unseen since the series exists (1991). Manufaturers expect their selling prices to increase over the next three months, faster than during the past quarters.

In October 2021, the manufacturers' opinion regarding the development in demand has remained very favourable. The balance on the past variation in the overall demand has barely dropped and remains well above its average. The balance on the expected overall demand, slightly on the rise, has also remained well above its own average.

Business managers have been almost as numerous as in July, and far more than on average, to anticipate a rise in the foreign demand over the next three months. Moreover, they remain as optimistic as in July regarding the general exportation prospects for the whole industrial sector. Conversely, the balance of opinion on the past foreign demand has slipped down sharply, while remaining at a high level.

Effectively, the proportion of companies declaring that their production is limited by a lack of demand only has distinctly diminished this month. At 10%, it stands at the lowest since the series exists (1991).

Even more business managers than in July are experiencing supply difficulties preventing them from increasing their production as they would like. The proportion of companies declaring difficulties of supply only has again risen and reached 50%, a level unseen since the beginning of the series (1991).

Sourcing difficulties weigh heavily in this unprecedented situation. The proportion of companies whose production has been limited by sourcing problems has grown in all industrial sectors. It had already reached a high point in July 2021, and has hit a new one in October. In the branch of transport equipment, the enterprises suffering from sourcing difficulties represent almost three quarters of the production.

At 82%, the production capacity utilisation rate is stable and nearly at its long term average level. Many enterprises are at the limit of their production capacity: 42% of enterprises deem that they could not increase their production with their current means if they received more orders. This proportion has been slighlty on the rise since last July and stands at its highest level since the series exists (1976). Likewise, fewer business managers than in the previous quarter consider their production capacity as sufficient given the expected development in orders over the next three months: the related balance has fallen for the third consecutive quarter.

Manufacturers had already reported a sharp increase in their selling prices during the first half-year; they have drawn the same conclusion in October. Over the last three months selling prices would appear to have increased by +1.7% on average. The average of this indicator since 1991 is only +0.2%. In addition, business managers estimate that their selling prices should increase by +1.1% over the next three months, i.e. more than the +0.8% increase they anticipated in July 2021, for the July-September period.

The balances relating to the change in workforce size over the last three months and over the next three months have again increased sharply and are further surpassing their long-term average. In the same time, the proportion of enterprises experiencing recruitment difficulties has grown again and stands now at 57%, against 44% last July, well above its long-term average (30%).

Asked about the change in their competitive position, business managers have declared that it have deteriorated slightly on the European market. On the national market and on the foreign markets outside the European Union, their opinion has been virtually unchanged. All of these balances of opinion stand above their average.

In the good-producing industries, slightly more manufacturers in October 2021 than in April have announced a rise in their investiments in 2021. In the other transport equipment, the related balance of opinion has vigorously improved. Conversely, in the motor vehicles sector, far fewer manufacturers than in April have announced a rise in their investment in 2021.

Concerning 2022, manufacturers have expressed a first judgment on the expected trend in their investment: the associated balance of opinion is at this stage close to the one related to the change in investment in 2021. In the other transport equipment, however, investment should increase significantly in 2022 compared to 2021.

For the year 2021, technical factors come at the top of the factors encouraging manufacturers to invest. In addition, business managers have been much less numerous than in October 2020 to indicate that the financing conditions have been an incentive to invest in 2021. Regarding 2022, business managers anticipate that demand should encourage them to invest more than in 2021.

Replacing worn-out installations or equipment is the purpose of investment most often mentioned in 2021. In addition, the share of investment decisions aimed at modernising and streamlining production has increased markedly between the forecast of October 2020 and that of October 2021, at the expense of investment aimed at expanding the productive capacity. Finally, in 2022, the economic motivations for investment should be very similar to those in 2021.