Like many other suppliers of car components in the areas, Mr. Zhu said he would add capacity “passively,” or only when the company receives new orders, instead of making projections now. That means they’ll likely buy some new equipment and hire more temporary workers instead of building new factories from scratch.
That combination of high sales and sluggish investment is also common outside China. According to BNP Paribas, capital expenditure by businesses included in the U.S. Standard & Poor’s 500 index during the third quarter was at its lowest level relative to sales since 2010.
The weakness in capital expenditure came at a time when consumer spending was strong, which is usually a spur to businesses to spend more on expanding capacity. In the eurozone, for example, consumer spending rose by 4.1% in the three months through September, but investment spending fell by 0.9%.
Even where there is uncertainty, some businesses want to invest, but face challenges because of strained supply lines and surging costs.
This year, exports of Italian wine are set to exceed their pre-pandemic levels in 2019. But the country’s wine growers aren’t using those extra revenues to invest.
Matilde Poggi, a winegrower based in Cavaion Veronese, in northern Italy, says that many of the country’s vineyard owners just can’t expand because they are struggling to get their hands on needed equipment and materials.
Their everyday costs are also rising, as prices for cardboard packing increase by as much as 13%, metal bottle caps become dearer and energy suppliers warn of up to a 30% increase in gas and electricity bills, said Ms. Poggi, who is also the president of the European Confederation of Independent Winegrowers.
“People don’t want to spend money now,” she said.
Ms. Poggi started building a new warehouse for her own operation in July and wishes she could have postponed. Current supply-chain problems and general inflation mean she will be paying some 30% more than she once thought.
These price rises will all feed into the consumer. At a recent meeting of her trade body, board members polled said there would be a 3% to 5% rise in the price of a bottle, with some saying up to 10%, said Ms. Poggi.
Demand for the tungsten, a resource used in satellites and semiconductors, is soaring, pushing the price up 39% from the start of the year to mid November, according to Almonty Industries Inc., a Toronto-listed miner with operations in South Korea, Portugal and Spain.
But the cost of the equipment, steel rods, fuel and other inputs needed to take it out of the ground is also rising. Chief Executive Lewis Black also fears labor unions will ask for pay rises next year; unions in Portugal are already asking for a 14% price increase, he said.
All that has forced the company to idle half its world-wide production. It is investing in a new South Korea mine, but has decided not to sink the $43 million it would take to restart mines in Spain that it closed last year due to Covid-19.
“There is demand for raw materials, but the operating costs of mines are now starting to increase quite dramatically,” he said. “We are caught between a rock and a hard place.”