over 2 years ago • 3 mins
Data out on Friday showed that activity in France and Germany’s manufacturing sectors declined in October, as the countries clock off early while there’s still work to be done.
What does this mean?
France and Germany’s manufacturers are stuck in a vicious cycle these days. There aren’t enough parts and materials to go around, which either means they have to fork out extra or can’t make the products they need, period. And while they can pass any higher costs on, that’s only been encouraging their customers to delay or cancel their orders. That’s left manufacturers with no choice but to cut down production, creating even more shortages. All this has taken a particular toll on France and Germany: October data showed that manufacturing activity in Europe’s two biggest economies has fallen to its lowest level since the start of the pandemic.
Why should I care?
The bigger picture: There might not be a right move.
The European Central Bank – which is set to meet next week – is under more and more pressure to curtail rising prices by raising interest rates. But some economists are worried that any rate hikes could end up slowing down the region’s recovery even more, if not derail it completely. If the central bank was hoping for data that’d make its decision easier, then, this ain’t it.
Zooming out: No one’s safe from shortages.
Even social media companies are feeling the effects of supply chain issues: Snapchat warned last week that advertisers are spending less on the platform since they can’t get their hands on products to sell in the first place. Well, that and the fact that Apple’s stringent new privacy settings are forcing companies to rethink their ad strategies altogether. That might be why investors sent its stock down 25%, and why Facebook and Twitter – both of which are set to report their earnings soon – saw theirs fall too.
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Intel reported mixed earnings late last week, as the chipmaking giant struggles to hack it in the absence of some of its best customers.
What does this mean?
The irony of this chip shortage wouldn’t be lost on Alanis Morisette: PC makers need Intel’s chips badly, but the very fact that there is a shortage means that they’re making fewer PCs, which is in turn hurting the part of Intel’s business that makes the chips they need. Hence the segment’s revenue fell 2% last quarter compared to the same time last year. Instead, Intel is clinging to the aspect of its business that is working out – namely chips for data centers, whose sales were up 10%.
Why should I care?
For markets: You have to spend money to make money.
Intel hasn’t just been losing market share to its rivals for the last couple of years: once-loyal customers including Amazon, Microsoft, and Apple have started designing and producing their own chips too. So to keep from losing anyone else, the chipmaker’s invested $20 billion this year on improving its manufacturing capabilities, and said last week that it’s planning to spend another $28 billion next year. Investors, then, have good reason to be concerned about what that might do to its profit, which might be why they sent Intel’s shares down 10% after the announcement.
Zooming out: Ce n’est pas bien.
Shortages of all kinds aren’t doing carmakers any favors either: France’s Renault said on Friday that it’s expecting to make 500,000 fewer cars this year than they would’ve done otherwise – a big jump from its September prediction of 220,000. The company didn’t adjust its profit outlook, mind you – mostly because it’s hoping to make up for the shortfall by cutting costs and pushing its more profitable models.
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