German industry is sinking into an “existential crisis”

“Existential crisis.” That's how he knows, this Friday, The Economist Difficulties facing German industry. the reasons? The Spanish bulletin says that the cost of energy, the impact of wars, weak investment, and global competition led by China.

This “existential crisis” has had a major impact on the German economy, but it may also have a contagious effect in other regions of the world. This is because industry represents 24% of Germany's GDP, and the country contributes 25% of the Eurozone's GDP, warns The Economista.

Added to this is the fact that 10% of European manufacturing companies are German companies, and this sector generates more than 30% of the total value added of the European Union. Not to mention, as El Economista explains, companies with German origins that are world leaders in their sectors, such as Bayer, BASF, Daimler, Volkswagen and Siemens.

This scenario may become more serious given that the country's industrial production fell by 0.7% in November. Since the beginning of 2023, it has already fallen by 5%, and is down 9.4% compared to the pre-pandemic period.

The Economista confirms that this decline in German industry also includes construction, an indicator that fell by 2.9% in November.

But the breaks in the industry are much broader. In the field of production of durable consumer goods, it decreased by 2%, and in November the production of intermediate and capital goods decreased by 0.7% and 0.5%, and in the same month the production of computers and electronic products decreased. Manufacturing industries decreased by 4.6%, the transportation equipment industry decreased by 0.9%, and energy-intensive industries decreased by 1.8%.

The short-term outlook is not the best. The cost of energy could delay the recovery of energy-intensive sectors. Even demand is on the same path due to the “weak economic growth” in the country, which has a negative impact on the amount of national and international orders. The Economista said that even sectors such as automobiles and construction, although they showed better performance during the pandemic, still suffer from low demand.