How have higher energy prices affected industrial production and imports?

This box analyses how the increase in energy prices since autumn 2021 has affected euro area aggregate industrial production and import volumes.

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ECBECB
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https://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202301_02~8d6f1214ae.en.htmlhttps://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202301_02~8d6f1214ae.en.html
Retrieved on: 
Monday, February 20, 2023
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Tags: 
PMI, Coronavirus, Mining, Shock, Time, HICP, Metal, Issue 1, Ohio Issue 2, European Commission, COVID-19, Harmonised Index of Consumer Prices, Database, Blog, Chemical industry, Ammonia, Country Time, European, OECD, United States Consumer Price Index, SVAR, ECB, Security printing, Natural gas, Bookkeeping, Renewable energy, Agriculture, EU
Geotags: 
EUROPEAN UNION, RUSSIA, UNITED STATES, UKRAINE
Summary
Key Points: 
  • This box analyses how the increase in energy prices since autumn 2021 has affected euro area aggregate industrial production and import volumes.
  • Between September 2021 and October 2022 average euro area consumer and producer energy prices increased by 49.5% and 93.4% respectively.
  • In the same period euro area industrial production excluding construction and import volumes excluding energy grew by 2.3% and 10.3% respectively.
  • These developments are in line with the expectation that adverse energy supply shocks raise production costs, which can cause a drop in output and an increase in imports from countries that are less dependent on global energy production.
  • [1] Euro area countries imported more in sectors relatively more exposed to increases in energy prices from trade partners that were less affected by the energy price shock.
  • Euro area industrial production and imports
    a) Manufacturing industrial production by sub-sector
    (percentage changes in industrial production and percentage point contributions relative to January 2020)

    b) Manufacturing import volumes by sub-sector
    (percentage changes in import volumes and percentage point contributions relative to January 2020)

    Sources: Eurostat, Trade Data Monitor and ECB staff calculations.

  • Low (high) energy-intensity sectors are defined as those with an energy intensity lower (higher) than that of the median sector.
  • Manufacture of coke and refined petroleum products is excluded as it is part of the energy industrial grouping.
  • At the same time, energy-intensive production sectors faced much higher energy costs in 2022, and this was behind the drop in output.
  • Empirical analysis confirms that energy supply issues and bottlenecks in production processes played a key role in the developments in aggregate industrial production and aggregate import volumes (excluding energy) in 2022.
  • The analysis uses the Harmonised Index of Consumer Prices (HICP), industrial production (excluding construction), Purchasing Managers’ Index (PMI) suppliers’ delivery times, consumer energy prices and import volumes of goods excluding energy.
  • The assumed sign restrictions at impact are as follows: demand shocks imply HICP (+), HICP energy (+), industrial production (+), import volumes (+) and PMI suppliers’ delivery times (-); energy supply shocks imply HICP (+), HICP energy (+), industrial production (-) and PMI suppliers’ delivery times (-); supply chain disruption shocks imply HICP (+), industrial production (-) and PMI suppliers’ delivery times (-); other supply shocks imply HICP (+) and industrial production (-); foreign shocks imply HICP (-), industrial production (-) and import volumes (+).
  • Marginal effects of imports on production in industries with different energy intensities (the higher the percentile, the higher the energy intensity)
    (x-axis: percentile of energy cost increase; y-axis: correlation coefficient)

    Sources: Eurostat, Trade Data Monitor and ECB calculations.

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