On the obstruction of production by enterprises in the business cycle: A Compositional Data Analysis

Once a quarter, as part of its ongoing Business Surveys, the ifo Institute asks companies in the manufacturing sector whether they face an obstacle to production and, if so, whether they consider themselves faced more with supply or demand restrictions. Looking at developments in the recent upswing, Klaus Abberger of ETH Zurich and Wolfgang Nierhaus of the ifo Institute show that supply constraints play a very strong role in manufacturing, although preliminary estimates suggest that the production gap is not unusually large in historical terms.