TOP 2022 TREND, DRAGFLATION: FRENCH AND GERMAN FACTORY OUTPUT SAGS IN MARCH

The number of new orders placed with German factories declined 4.7 percent in March, according to state agency Destatis, far below the 1.1-percent dip that analysts had expected.

Orders from within Germany dropped 6.7 percent. Orders from outside the Eurozone plummeted 13.7 percent.

German automakers, the foundation of the country’s industry, lost production due to loss of computer chips and wiring harnesses that had been made in Ukraine.

Volkswagen reported selling out of electric cars in Europe and the U.S. for the rest of this year and into 2023.

French vehicle factories made 7.3 percent fewer cars in March, pulling down the nation’s overall factory output by 0.5 percent. Analysts had predicted production to remain flat.

France’s industrial production also declined 1.2 percent in February, dropping volumes below pre-COVID levels.

The loss of factory output is due to Ukraine’s lost ability to manufacture and deliver, as well as to Western sanctions, still-disrupted supply chains, and materials shortages, the Financial Times reported.

TRENDPOST: France and Germany will not regain recent production levels for some time, for the reasons the FT cited. With economic output declining and prices still rocketing up, Europe’s economy is entering a Dragflation cycle: prices will continue to rise and economic activity will continue to contract.

The cycle will last at least into this year’s third quarter and probably longer unless there is a halt to the Ukraine War and sanctions on Russia are eased.