INDUSTRIAL POLICY DOSSIER
Industry Report
Industrial production and trade in the individual industries
▪ Manufacturing output is set to fall by three percent this year, based on the weak development seen in the first six months of the year. This would mark the third consecutive year of downward production, after a contraction of 0.2 percent and 1.2 percent in the two preceding years.
▪ Industry in the European Union is also stuck in recession. Here too, we expect output to drop by three percent this year overall. Key industries such as vehicle production, the electro industry and machinery manufacturing are seeing decreases in output of over seven percent in each case. Positive exceptions to the general downtrend are other transport equipment and chemicals. On a global level, growth has also lost steam. We now only expect global output to grow by 1.5 percent, rather than our previous estimate of 2.5 percent, with industrialised countries expected to contribute a slim minus.
▪ In 2024 overall, German goods exports are in for a drop of 0.5 percent overall, based on our calculations. Imports are also expected to be weak. The upcoming months are unlikely to bring an improvement. The export prospects of industry have continued to deteriorate.
▪ We expect the global trade in goods to increase by two percent in 2024 –much lower than the three to 3.5 percent growth anticipated at the start of the year. While the export of goods from emerging countries is expected to expand by a good five percent, exports from advanced countries are steering towards stagnation.
Industrial production only gradually picking up pace
Global industrial production (excluding construction) is only exhibiting very limited momentum, propped up primarily by growing output among emerging countries. In this group of countries, production has expanded by more than three percent in each of the last five quarters year on year, according to figures from the Netherlands Bureau for Economic Policy Analysis (CPB). Industrial production among advanced countries, in contrast, has headed downwards continuously for the past six quarters year on year. Between January and August 2024, industrial production among advanced economies was down by 0.6 percent compared to the same period last year. Industrial production in the emerging countries, meanwhile, increased by 3.7 percent, pulling global industrial output up by 1.6 percent overall.
World: Industrial production*, Purchasing Managers Index
Managers Index seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis, own calculations
Growth only in Asian countries excluding Japan
The latest figures for global industrial production from August show upward movement both compared to the previous month and compared to the same month last year, indicating further growth. The purchasing managers’ index, on the other hand, is pointing the other way and has been sliding down continuously since May. Standing at 48.8 index points at last count, it has now been in contractionary territory for the last three months. In view of the performance over the first six months of the year, we are downwardly adjusting our forecast for 2024 overall and now expect an increase in global industrial production of 1.5 percent (down from 2.5 percent). Advanced economies
In the advanced economies, industrial production dropped 1.3 percent in the first quarter of the current year compared to the same quarter last year. In the second quarter, output continued to tail off, but the drop was markedly slower than at the start of the year at minus 0.5 percent. The downward trend may have bottomed out in the middle of the year with output rising in the first two months of the third quarter both quarter on quarter and year on year. From January to August, industrial production
in the advanced economies was nonetheless still 0.8 percent down. Among the advanced economies, the Asian countries (excluding Japan) performed the best. In the first eight months of the year, output here was 6.1 percent up on the same period last year. Among the remaining advanced economies (excluding Asia), output was up by a lean 1.1 percent. The euro area recorded the steepest decrease in output, contracting 3.3 percent. Industrial production in Japan was also a substantial three percent down. In the United Kingdom, industrial production was down 1.3 percent in the first eight months of the year, and down 0.3 percent in the United States.
The signals for the further course of the year are mixed. Although the latest figures show an increase in industrial activity, the purchasing managers’ index for this group of countries has remained in contractionary territory since May 2024, indicating contraction. In September 2024, the index dropped down to 47.5 points, its fourth consecutive fall. In view of the course of the year so far, we expect industrial activity to pick up slightly in the fourth quarter, in which case, industrial production among the advanced economies in 2024 overall should still manage to match last year’s level.
Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis Advanced economies: Industrial production*, Purchasing Managers Index
Managers Index seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Emerging countries
Growth impetus mainly from China and Central and Eastern Europe
Industrial production among emerging countries rose 3.6 percent in the first quarter of 2024 year on year, fuelled by high growth in China and in Central and Eastern Europe. In the second quarter, industrial production among emerging countries continued to rise, going up four percent. Industrial activity continued to increase across all regions apart from Africa and the Middle East, where was down for the third quarter in a row. In the first two months of the third quarter, the upward trend continued with industrial output up by 3.7 percent from January to August 2024 compared to the first eight months of the previous year. China’s industry has once again adopted the role of growth engine as in the
previous year, expanding at an impressive 5.7 percent. Growth in industrial output was also above average in Central and Eastern Europe (up 4.7 percent). Industrial output was below average in the Asian emerging countries excluding China (up 2.2 percent) and in Latin America, where industrial output only grew by a slim 0.8 percent. Going the other way, output in Africa and the Middle East contracted by 1.2 percent in the first eight months of the year.
China’s industry was able to lead the group of emerging countries back to the good growth rates of old, with the remaining Asian emerging countries and the countries of Central and Eastern Europe providing additional upwind. In September 2024, the purchasing managers’ index for this group of countries dropped into contractionary territory for the first time in twenty months, sliding down to 49.8 index points. In view of the course of the year so far, even if output moves sideways in the fourth quarter, industrial production among emerging countries overall this year should meet our spring growth forecast of three percent.
Emerging economies: Industrial production*, Purchasing Managers Index
Central
Asia
China
Purchasing Managers Index seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis
United States
Second year of low growth
US industry (industrial production excluding construction) is meandering along for the second year in a row. In the first quarter 2024, industrial production was down year on year for the fourth consecutive quarter, going down again slightly steeper, this time by 0.5 percent. Particularly weak performances were registered by machinery manufacturing and the electro industry, while vehicle production picked up slightly. In the second quarter 2024, output stagnated at last year’s level before contracting a further 0.4 percent in the third quarter. Overall, industrial output in the first nine months of the current year was 0.3 percent up on the same period last year.
Production in the manufacturing sector was down by a somewhat more pronounced 0.5 percent in the same period. Among the individual industries in the manufacturing sector, the steepest drops as of September were in machinery manufacturing and basic chemicals, which both saw output fall by 2.8 percent. The downward trend in the food industry, at two percent, and in the metal industry at minus 0.4 percent, were a little more moderate. While the production of computers rose by 4.1 percent in the first nine months of the current year, the production of electronic devices and equipment dropped by a minimal 0.1 percent. Although vehicle production nudged up 0.1 percent, passenger car production, which forms a part of this category, was down by 0.5 percent. The food industry also suffered an aboveaverage contraction in output of two percent.
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year United States: Industrial production*, Purchasing Managers Index
Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
The latest figures show a slight improvement. Output in the manufacturing sector was up by 0.1 percent in the calendar and seasonally adjusted two-month comparison August/September 2024 compared to the previous two months. At the same time, the purchasing managers’ index for manufacturing has gained ground following three downward months. In October, the index climbed to 48.5 points, still clearly below the threshold value of 50 index points. For the year overall, we are downwardly revising our growth forecast from spring of one percent and now expect production in the manufacturing sector to stagnate.
China
Industry continues its upward path
China’s industry continued its upward path in the first quarter of 2024. According to figures from the Netherlands Bureau for Economic Policy Analysis (CPB), industrial production was 1.2 percent higher in the first quarter 2024 than in the previous quarter. Growth was even higher year on year, at 5.7 percent. According to official Chinese figures, the output of cars and chemical products increased by more than ten percent year on year in both cases. The electro industry and other transport
equipment also recorded high growth. The production of drugs and cement dropped in the same period. In the second quarter, output expanded even more, climbing 6.1 percent higher year on year. Industries fuelling this growth in output were above all information and communication technology, cars and chemical products. While the production of drugs also increased in the second quarter, the production of cement dropped substantially.
The latest figures show the upward trend continuing. According to CPB figures, in the first two months of the third quarter, China’s industry increased its output by 4.9 percent year on year. Industrial activity was also higher compared to the previous two-month period May/June 2024 (up 1.8 percent). In the third quarter, the production of other transport equipment and information and communication technology posted the highest growth. Textiles and machinery manufacturing also continued their upward path. Vehicle production started to show some weakness, particularly year on year, and the production of cement fell by more than one tenth.
China: Industrial production*, Purchasing Managers Index
Industrial production (right axis)
Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
The purchasing managers’ index for manufacturing has oscillated around the threshold value of 50 index points since the middle of the year. At the start of the fourth quarter, the index re-entered expansionary territory at 50.3 points. This indicates a moderate rise in production for the fourth quarter. For 2024 overall, we now expect industrial production to grow by just under five percent (down from five to seven percent).
Japan
Industrial production rather weaker than expected
Japan’s industry is now in its third year of recession. At the start of the year, industrial production (excluding construction) was four percent lower than in the first quarter last year. Output contracted a further two percent in the second quarter. Although the downward trend flattened out in the middle of the year, production was still 2.8 percent lower in the first nine months of the current year than in the same period last year.
Output in the manufacturing sector was 3.1 percent down year on year as of September 2024. Among the individual industries, production in machinery manufacturing contracted a hefty 5.7 percent. In the electro industry, output turned down again (down 5.1 percent) following a positive performance last year. The chemical industry including pharmaceuticals recorded a decrease in production of one percent. Chemicals alone (basic chemicals) was markedly worse, at minus 2.6 percent. The energyintensive industries saw production fall further, with paper down 2.9 percent, ceramics down 4.3 percent, metalworking industry down 4.5 percent and cement down 5.8 percent. Vehicle production lost 4.3 percent following a solid rise the previous year.
Japan: Industrial production*, Purchasing Managers Index
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
Japan’s industrial activity lost momentum at the end of the third quarter. In the calendar and seasonally adjusted two-month comparison August/September 2024, production was 1.1 percent lower than in the previous two months. Output was down tangibly, particularly in the electro industry and in vehicle production. The purchasing managers’ index for manufacturing, after reaching its highest point in the year of 50.4 index points in May, was already back in contractionary territory by July. Standing at 49.2 points, it was still in contractionary territory in October, indicating further downward production in the fourth quarter. This would bring the drop in industrial production for the year overall to more than three percent.
South Korea Industry back to growth
South Korea’s industrial production (excluding construction) grew by six percent in the first quarter 2024. The large growth was principally fuelled by the electro industry, which saw its output expand by more than 15 percent. Industrial activity in the chemical industry, vehicle production and machinery manufacturing went the other way. In the second quarter, output increased by more than four percent. The pace of growth slowed down substantially in the third quarter but was still 4.1 percent higher than the previous year as of September.
In the manufacturing sector, output in the first nine months of the current year compared to the same period last year was 4.3 percent higher. Among the individual industries, pharmaceuticals saw output soar 19 percent, narrowly overtaking the electro industry, which expanded 18.7 percent. The chemical industry (up 1.5 percent) was only partly able to compensate for the weak start to the year. The producers of vehicles and components (down 1.8 percent) and machinery (down one percent) had not been able to match last year’s output levels as of September. The metalworking industry also curbed its output somewhat.
Industrial activity is expected to cool off slightly in the further course of the year. In the calendar and seasonally adjusted two-month comparison August/September 2024, industrial production was 0.1 percent lower than in the previous two months. The purchasing managers’ index for manufacturing was down by more than three index points in September and remained in contractionary territory in October, languishing on a level of 48.3 points, its lowest level in 15 months. Despite the slight cooldown indicated for the end of the year, we are sticking to our forecast of April and still expect manufacturing output to increase by three percent in the year overall.
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
Source: Macrobond *Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
United Kingdom
Industrial production down for the fourth consecutive year
The United Kingdom’s industry is still stuck in recession. In the first quarter of the year, industrial production (excluding construction) was 0.6 percent down year on year. The weak performance of machinery manufacturing and chemicals was not balanced out by the good results from vehicle production and the metal industry. In the second quarter, industrial activity displayed increased downward momentum, contracting 1.6 percent. Alongside subsiding momentum in vehicle production, the electro industry recorded steep drops. The downward trend continued in the third quarter, making production in the first nine months of the year 1.4 percent lower than in the same period last year Compared to this result, the decrease in manufacturing output in the same period was moderate, down only 0.3 percent. Among the individual industries, machinery manufacturing recorded the steepest drop at 9.2 percent. Producers of electrical equipment (down 6.1 percent) and producers of data processing equipment and optical products (down 5.6 percent) also saw production decline
considerably. Going the other way, vehicle production was up by an impressive 12.9 percent. Among the energy-intensive industries, chemicals curbed its production by 1.2 percent. The production of base metals was also down by 1.2 percent. Output in the paper industry was up by a slither of 0.1 percent as of September. The producers of pharmaceutical products also managed to increase their production by a modest 0.6 percent.
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
The purchasing managers’ index for manufacturing was in expansionary territory over the summer months, reaching its highest level of the year of 52.5 points in August. It dropped in the next two months, just slipping back into contractionary territory in October at 49.9 points. In view of the development this year so far, we no longer expect momentum to pick up in the fourth quarter and, contrary to our forecast in April, now anticipate a decrease in industrial production of 0.5 percent compared to the previous year (down from up one percent). This would mark the fourth consecutive year of downward industrial production.
European Union
Production falls for the second year in a row
In the European Union, industrial activity continued to fall at the start of the year. Industrial production (excluding construction) dropped by 3.9 percent in the first quarter 2024. Overall output was pulled down primarily by strongly downward output in the electro industry and pharmaceuticals. The only industries that managed to increase production slightly were the energy-intensive industries chemicals, paper and food. In the second quarter, the downward momentum slowed down to minus 2.9 percent year on year. Industrial activity only decreased slightly in the third quarter. Overall, industrial production in the EU in the first nine months of the year was 2.7 percent lower than in the same period last year.
In the manufacturing sector, output was down by a somewhat more pronounced three percent in the first nine months of the year. Among the key industries, the electro industry suffered the largest drop in output of 8.4 percent. Vehicle production and machinery manufacturing were only slightly less worse
off, contracting by 7.3 percent and seven percent respectively. Output in the metal industry was down 3.4 percent as of September. In the pharmaceutical industry, production did pick up over the summer quarters but not enough to compensate for the weak start to the year with output 0.9 percent below last year as of September. Individual energy-intensive industries displayed a rebound effect, with chemicals increasing output between January and September by 2.5 percent and paper by 3.1 percent. Food and tobacco and beverages, less exposed to economic fluctuations, but nonetheless energyintensive, increased output by 1.7 percent in the same period. Other transport equipment represented a positive exception to the general gloom, posting an increase in production of 4.8 percent as of September.
European Union EU27: Industrial production*, Purchasing Managers Index
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
The latest developments point towards a slight downward trend in industrial activity. In the two-month comparison August/September 2024, manufacturing output in the EU was 0.1 percent down on the previous two months and 1.5 percent lower than in the same period last year following calendar and seasonal adjustment. At the same time, the purchasing managers’ index for manufacturing dropped for the second time in a row. In October, it fell to its lowest level of the year, down to 43.8 points. We therefore expect to see production decrease further in the fourth quarter, which will bring production down to a good three percent below last year and not, as forecast in spring, level with last year.
Germany
Production downward for the third consecutive year
Germany’s industry recorded a hefty setback at the start of 2024. Industrial production (excluding construction) contracted 5.6 percent in the first quarter 2024 compared to the same quarter last year This slump was triggered by the clear decrease in energy production, the decrease in vehicle production of just over ten percent, and the drop in output of just under ten percent in the electro industry. In the second quarter, industrial activity was down on a similar scale of five percent. While vehicle production flattened its downward slide, the situation in machinery manufacturing deteriorated substantially. In the third quarter, activity was down across almost all industries year on year apart from
in other transport equipment and chemicals. All in all, industrial production in the first nine months of the year was down by five percent compared to the same period last year.
Industrial production (right axis)
Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
In the manufacturing sector, production was down by 5.1 percent between January and September 2024 year on year following calendar and seasonal adjustment. Among the individual industries, the electro industry and machinery manufacturing recorded the steepest drops, contracting 10.7 percent and 8.5 percent respectively. Production also decreased above the average rate in vehicle production (down 6.9 percent), textiles and clothing (down 6.2 percent) and among metal producers and metalworkers (down 6.1 percent). The production of pharmaceutical products was down by 2.9 percent. The energy-intensive industries managed to increase their output on the back of the steep losses suffered last year. While production in the paper industry only nudged up 0.6 percent, output in the chemical industry was up by 4.2 percent in the first nine months of the current year. The less economically volatile food, tobacco and beverage industry, also produced somewhat more than in the same period last year, increasing output by 0.5 percent. Other transport equipment continued its positive trend from last year and had increased output by 5.7 percent as of September.
The outlook for the final quarter of the year is rather subdued. Every second company in the manufacturing industry is not receiving enough orders and the high backlog of orders accumulated during the pandemic has largely been worked off. There are first indications that the downward trend in production is bottoming out. The latest figures on industrial production, the two-month comparison August/September 2024, shows a slight increase in production of 0.2 percent compared to the previous two months, the first rise in four months. The purchasing managers’ index for manufacturing has also gained some ground. Following four consecutive falls, it recorded a substantial rise in October. At 43 index points, it is still well below the threshold to expansion of 50. In view of the course of the year so far, we are downwardly revising our forecast for the year overall to a decrease in industrial production of three percent (down from minus 1.5 percent). This would mark the third consecutive year of downward industrial production.
Germany’s industry falls further behind the EU
The Covid pandemic and the steep increase in energy prices have had a particularly enduring and powerful impact on German industry. While manufacturing output in the European Union was 1.3 percent higher than before the outbreak of the pandemic in the first six months of this year, in the same period, German industry produced 9.4 percent less than in 2019. The output of German industry is lower than across the European Union in almost all industries. One exception is other transport equipment which outperformed the European Union clearly, expanding with 9.2 percent compared to 2.6 percent in the European Union. Although production in the pharmaceutical industry in Germany was 10.2 percent higher in the first six months of the year 2024 than in 2019, in the EU, output in pharmaceuticals was more than 50 percent higher in the same period. The German electro industry recorded a setback at the beginning of the year, with production 1.9 percent lower than in 2019. At the same time, the electro industry in the EU expanded its production by 13.7 percent.
Development of production by industry change between 2019 (anual average) and 2024 (half-year average), ca, sa, in percent
Manufacturing
Pharmaceuticals
Electronic industry
Other transport equipment production
Machinery manufacturing
Paper industry
Metal industry
Chemical industry
Glass, ceramics, processing of stones, industrial minerals
Motor vehicle production
Sources: Macrobond, own calculation
France
Production could still draw level with last year
Deutschland
EU
France’s industry has failed to gather momentum following a good start to the year. Industrial production (excluding construction) recorded a slight increase in production of 0.5 percent year on year in the first quarter 2024. In the second quarter, the trend turned down slightly with production dropping down to one percent below the same period last year. At the start of the second half of the year, industrial activity remained weak. Output in the third quarter 2024 was down by 0.5 percent year on year, and 5.6 percent lower than in 2019, the year preceding the Covid pandemic. All in all, production in the first nine months of the current year was 0.3 percent lower than in the same period last year.
In the manufacturing sector, production was 0.5 percent lower as of September. The steepest drops in production year on year were recorded by vehicle production at minus twelve percent and machinery manufacturing at minus eight percent. Textiles (down 3.7 percent) and the metal industry (down 1.9 percent) also posted above-average drops in production as of September. The electro industry curbed its output minimally (down 0.2 percent). In chemicals, production was 0.5 percent lower on account of the weak performance over the summer months. The less volatile food industry increased production by a slim 0.3 percent. Though both energy-intensive industries, chemicals contracted while the paper industry managed to increase its output again (up 1.6 percent). The pharmaceutical industry recorded a double-digit increase in output for the first time in nine years, up 10.1 percent year on year as of September.
France: Industrial production*, Purchasing Managers Index
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
Industry may pick up some momentum in the final quarter of the year. In the two-month comparison August/September 2024, industrial production was 0.8 percent higher than in the previous two months following seasonal and calendar adjustment. At the same time, the purchasing managers’ index for manufacturing, which has been in contractionary territory since February 2023, has gained some of the ground it lost. While we no longer think that the one-percent increase in production we forecast in spring is within reach, output could well draw level with last year by December.
Italy
Production heading for second consecutive year of contraction
Italy’s industry (industrial production excluding construction) started out 2024 with a pronounced fall. Industrial production was 3.5 percent lower year on year. In the second quarter, industrial activity dropped on a similar scale, going down three percent. Industrial output continued to slide in the third quarter, this time by 3.5 percent. All in all, industrial production in the first nine months of the current year was 3.3 percent down on the same period last year.
The manufacturing sector recorded a slightly steeper drop in production of 3.5 percent in the same period and following seasonal and calendar adjustment. Among the individual industries, the producers of motor vehicles and components saw their output contract by 19.4 percent, which was not just by far the biggest drop in production but also about one quarter lower than in 2019, the year preceding Covid. Textiles and clothing also recorded a double-digit drop in production. The less energy-intensive electro industry registered a slight dip in production of 0.7 percent in the first nine months. In machinery manufacturing, output was 4.5 percent down year on year and, in the third quarter, 3.2 percent lower than before the pandemic. The pharmaceutical industry curbed output by 2.1 percent. The metal industry curtailed its production by 4.3 percent, producing a good ten percent less than in 2019. Among the energy-intensive industries, the chemical industry (up 0.7 percent) and paper (up 1.5 percent) recovered slightly. The food industry expanded its activities by 1.7 percent and other transport equipment had produced 8.2 percent more as of September than in the first nine months of last year.
Italy: Industrial production*, Purchasing Managers Index
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
In the further course of the year, manufacturing output is expected to continue losing steam. The purchasing managers’ index has remained below the threshold to expansion of 50 points since April 2024. In October, the index dropped to 46.0 points which is its third lowest point this year. We expect production to continue its downward trend in the fourth quarter. For the year overall, we are downwardly revising our 0.5 percent growth forecast from spring and now expect production to contract by three percent.
Spain Industry back to growth
Industrial activity in Spain turned back to growth at the start of 2024. Industrial production (excluding production) recorded a marginal increase in production of 0.1 percent year on year in the first quarter 2024. The positive momentum in the chemical industry and vehicle production wat the beginning of the year were cancelled out by downward trends in the metal industry, machinery manufacturing and textiles. In the second quarter, industrial production again nudged up 0.1 percent year on year. This rise was fuelled mainly by increasing output in the pharmaceutical industry, chemicals and the electro industry. Output was down in vehicle production, machinery manufacturing and in the metal industry.
At the start of the year, production turned down again bringing the overall result for the first nine months of the year to stagnation year on year.
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Spain: Industrial production*, Purchasing Managers Index
Industrial production (right axis) Purchasing Managers Index, seasonally adjusted (left axis)
Source: Macrobond
In the manufacturing sector, output increased by 0.4 percent in the same period. Among the individual industries, production rose the most in the pharmaceutical industry, going up by 9.2 percent. Output in the chemical industry was up by 4.7 percent in the first nine months of the current year, following a similar upward trend to the electro industry, which increased 4.6 percent. Other transport equipment was also positive (up 3.7 percent) and so was food (up 0.4 percent). Vehicle production was not able to maintain the high level of growth recorded last year and saw production fall three percent. Machinery manufacturing was also downward (down 2.3 percent), as was textiles (down 4.3 percent). The metal industry had reduced its output by 0.8 percent as of September.
The most recent figures do not show a clear picture going forward. Most recently, production was a minimal 0.1 percent down in the two-month comparison August/September 2024 compared to the previous two months. Production was also marginally negative year on year. Going the other way, the purchasing managers’ index for manufacturing points towards a definite pick-up. After reaching its seven-month low in August, the index leapt upwards in the following two months. In October, it climbed up to 54.5 points, its highest level since February 2022, indicating growth in the next few months. In view of the course of the year so far, an increase in production of one percent should be within reach, but not the two percent increase forecast by us in spring
Global trade
After a weak year in 2023, global trade activity picked up at the start of 2024. In the first quarter 2024, the global trade volume was 0.4 percent higher than in the previous quarter, according to the Netherlands Bureau for Economic Policy Analysis (CPB). In the second quarter, the upward
momentum accelerated to 1.1 percent. As of August, the global trade volume was 1.3 percent higher than in the first eight months of the previous year.
In the first eight months, emerging countries exported a total of 5.4 percent more goods than one year ago. Among the individual groups of countries, exports from China rose the most, going up by 11.3 percent. Exports from Asian emerging countries (excluding China) also recorded an above average increase of six percent. Exports from Central and Eastern Europe and from Latin America increased below average, expanding 2.6 percent and 1.6 percent respectively. Going the other way, exports from Africa and the Middle East dropped 6.2 percent.
World: Exports according to region of origin
Index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Source: Macrobond
Exports from advanced economies had only increased by a total of 0.3 percent as of August 2024 Trends in exports within this group of countries were very mixed. While Japan’s exports were 0.4 percent down in the first eight months, the group of advanced Asian countries excluding Japan experienced the steepest rise, with exports climbing 8.2 percent. Strong momentum also emanated from the United States, with an increase of 3.4 percent. Exports from the United Kingdom suffered a hefty drop of 7.4 percent. The euro area exported three percent fewer goods than one year ago. Exports from the remaining advanced economies rose a lean 0.3 percent.
The latest figures show a further pick-up in trade activity. In August 2024, global exports increased by two percent compared to the previous month. Exports from advanced economies increased by 1.7 percent while exports from emerging countries rose 2.4 percent. Even if trade activity stagnates in the final quarter of the year, global trade activity should expand by a good two percent as forecast in spring 2024.
Development of German exports
After the turn of the year 2023/2024, German exports initially struggled to make headway. In the first quarter 2024, exports dropped by a total of three percent in nominal terms year on year. Trade with the United States (up 0.7 percent) and the United Kingdom (up 3.2 percent) brightened somewhat. On
the other hand, exports to the EU dropped 2.1 percent and to the rest of the world were down by a hefty 6.2 percent. In the second quarter 2024, exports were only 0.3 percent below last year’s level. Exports to the United Kingdom (up 5.9 percent) and the United States (up 8 1 percent) increased considerably. However, this failed to compensate for the reduction in exports to Germany’s EU trade partners (down 1.7 percent) and to China (down 4.3 percent). In the third quarter, the upward trend in trade with the United States and the United Kingdom continued and, this quarter, did manage to compensate for the strong contraction in trade with China (down 9.3 percent) and the moderate dip in EU trade (down one percent). Furthermore, exports to the rest of the world recovered (up 4.1 percent) making overall exports in the third quarter 0.5 percent higher year on year.
Germany: Exports according to region of destination
Index: two-month average, after calendar and seasonal adjustments, in percent, year on year
Sources: Macrobond, Deutsche Bundesbank
All in all, German exports were down by one percent in the first nine months of the year compared to last year. Looking at the destination regions, exports to the United Kingdom rose the most, like last year, going up by 5.4 percent. Trade with the United States was also up by a solid 3.4 percent. Going the other way, exports to the European Union and the rest of the world dropped by 1.6 percent in each case. Trade with China continued to decrease, continuing the downward trend from last year, with a drop of 4.8 percent.
The latest figures indicate a stabilisation of exports. In August and September 2024, exports increased by one percent compared to the previous two months following seasonal and price adjustment. The mood among exporters continues to be subdued. According to the ifo Institute, export prospects among surveyed companies have deteriorated continuously since June 2024. Even if exports pick up slightly in the final quarter of the year, German exports are set to drop by 0.5 percent in 2024 overall.
Industries in Germany
Automotive industry: latest figures show upward production
Production
In 2024 so far, production was down on last year until September. High growth in October turned the overall result around to an increase of almost one percent in the first ten months of the year. Since July, production in German factories has in part registered clear growth. While this is certainly good news, production levels this year are still twelve percent below the pre-crisis year 2019. The upwind seen in the last few months was comprised mainly of substantial growth in the production of electric cars which increased 20 percent in the third quarter and now accounts for 35 percent of domestic production. Pure battery electric vehicles recorded above-average growth of 25 percent, while plug-in hybrids expanded five percent. 2025 is the year set in the European Economic Area for carmakers to reach interim carbon emission reduction targets for new cars. Vehicles are now being produced that meet these targets and will be registered on the European market next year. This has triggered a downturn in diesel passenger cars, with production here tumbling 13 percent in the third quarter. Currently, only every sixth car coming off German production lines has a diesel engine. Petrol-powered cars, on the other hand, increased by an impressive 17 percent, accounting for 48 percent of domestic production.
The high backlog of orders from last year has now been worked off and the backlog of domestic orders has settled slightly below the 2019 level and is 23 percent lower than in the previous year. A shortage of orders is now the leading factor curbing production in the automotive industry, affecting 44 percent of surveyed companies according to the ifo Institute. The second major factor, though affecting a much lower proportion of companies of only 16 percent, is a shortage of skilled labour. Material shortages are currently not much of a problem with only eight percent of companies surveyed affected. The most recent indicators are upward, nonetheless. Domestic orders have increased tangibly since September and foreign orders also gathered pace in October. The industry’s workforce has contracted a little over the course of the year so far. In August, the number of workers in the automotive industry totalled 770,600, which is 1.1 percent less than one year ago. While the workforce of producers of motor vehicles and engines remained almost level with last year at 463,900 workers, the number of workers among automotive suppliers, which are particularly severely affected by the transformation towards electromobility, contracted 2.8 percent down to 265,900. The producers of vehicle bodies, trailers and coachwork employed 40,900 people, which is an increase of 0.8 percent.
Exports
Exports increased by four percent in the first ten months of the year, up to 2.7 million passenger cars. They are fuelling the growth in production, while domestic demand is rather stagnant. The proportion of exports increased by two percentage points, up to 77.6 percent. The biggest trade partner this year as of September was the United States with 332,700 passenger cars (up 14 percent), moving ahead of the United Kingdom again, which received 301,800 passenger cars (up two percent). France came in third with 155,800 units (up eleven percent). China dropped from third to fourth place, ahead of Italy and Spain, with 153,100 units (down ten percent).
Contact: Alexander Fritz / Phone: +49 30 8978 423 33 / Mail: alexander.fritz@vda.de
Construction industry: a difficult year
In autumn 2024, the trends in the construction industry are mixed. While commercial civil engineering is upward, new residential construction remains in a deep crisis. Sentiment in mainstream construction has improved slightly but is still on a similar level to 2009. In October, current business was rated at minus 25 points (January 2024: minus 36 points). The construction industry continues to face huge problems on account of the high interest rates on the capital markets (despite the current downtrend) and the steep increases in construction prices, which are set to rise slightly further still this year. According to a survey conducted by the German Chambers of Industry and Commerce in autumn 2024, construction companies are most worried about the shortage of skilled labour, weak demand and the economic policy framework.
The number of building permits (figures only available for building construction) is an advance indicator of the trend going forward. From January to August 2024, the estimated construction costs in residential construction were 19 percent lower in real terms. The number of permits for apartments contracted even more. Building permits for commercial construction were two percent down, while estimated construction costs in public building construction were up by around 18 percent in real terms.
Compared to the steep drop in incoming orders received by mainstream construction of 7.7 percent in real terms in 2023, the decrease registered between January and August 2024 was moderate at 0.7 percent. The trends within mainstream construction were mixed. While orders in civil engineering increased by 2.8 percent in real terms, incoming orders for building construction fell 4.5 percent. Residential construction even saw incoming orders drop 5.8 percent. In 2023, companies in residential construction were still feeding off their high backlog of orders but this is longer an option in 2024. The reach of orders in hand halved between February 2022 (6.1 months) and October 2024 (3.1 months). In civil engineering, on the other hand, the reach of orders in hand remained relatively stable.
The construction industry expects revenues from construction activity in mainstream construction to fall by four percent in real terms this year, which will be its fourth consecutive year of downward revenue. Residential construction will be particularly badly hit once again, as mainstream construction in this segment operates almost exclusively in new construction. The significant reduction in state funding has compounded the problems presented by the high interest rates and construction costs. Revenue in this segment is expected to drop by twelve percent in real terms in 2024. The trends in commercial construction are divergent. While weak industrial activity is impacting building construction, large orders, particularly from Deutsche Bahn and electricity suppliers, are boosting demand and production in commercial civil engineering. In 2024 overall, revenue here should increase by a slim 1.5 percent in real terms. In public construction, federal building activity is focussed on civil engineering. On account of a lack of funds, some contracts have been retracted in part and the construction schedule of the Autobahn GmbH prolonged. For 2024 overall, revenue is expected to dip 0.5 percent.
The labour market for construction has proved to be relatively stable. After sustaining a long period of expansion until 2022, the number of workers in the industry remained stable in 2023 at 928,000. In the current year, the construction industry expects its workforce to contract for the first time in 15 years, with a small reduction of 10,000 workers or one percent. If it was not for the fact that one quarter of workers are older than 55 and will therefore retire from active service in the foreseeable future, the cut in the workforce would have been more substantial.
Contact: Heinrich Weitz / Phone: +49 30 21286 144 / Mail: heinrich.weitz@bauindustrie.de
Building materials industry: the crisis continues
The building materials industry remains in a difficult position towards the end of 2024. Driven down by weak demand for building construction, the production of building materials this year up to and including September was all of 9.3 percent lower than last year in real terms, after already tumbling around 16 percent in 2023. The deep recession has impacted all sectors of the building materials industry, with disproportionately steep declines in those segments that supply the residential construction industry such as brick, sand-lime brick and aerated concrete. Production in individual segments is currently up to 50 percent below pre-crisis levels.
Production in September was only a moderate 3.3 percent lower year on year and residential construction activity is showing the first signs of a gradual turnaround with increasing volumes of and decreasing interest rate, but the German Building Materials Association (bbs) only expects the situation in the industry to improve in the medium term. For 2024 overall, the spring forecast for production of minus five to ten percent remains realistic.
In the year ahead, production should stabilise at a low level (production 2025: around zero percent). The development of the sector going forward will also depend on the stability of the political framework conditions, particularly given the end of the current coalition and the bringing forward of the federal elections. Reliability regarding public investment projects in civil engineering is especially important now in view of the confused budget situation.
The downward activity in the industry has prompted an adjustment of production capacities. After a long period of upward momentum, the workforce in the building materials industry has contracted substantially recently, shrinking four percent in the first six months of 2024. The closure of production facilities is playing a part in some segments, with companies much less keen to make investments.
The difficulties facing the industry are also reflected by the ifo business sentiment barometer. Current business is still downward, standing at minus 29 points at last count. Business prospects are also very weak at around minus 20 points, although optimism that the crisis will be overcome has risen in the past few months.
Contact: Christian Engelke / Phone: +49 30 7261 999 29 / Mail: c.engelke@bvbaustoffe.de
Chemical and pharmaceutical industry: recovery further delayed
Production
The situation for the German chemical and pharmaceutical industry remains difficult in 2024. The upwind recorded by many companies in the first six months of the year evaporated in the third quarter. The industry even saw production contract. The latest figures show revenue decreasing from both at home and abroad and a turndown in production in the third quarter on account of low incoming orders. Although production was still 1.5 percent higher year on year from January to September, production was very low last year so this does not represent a recovery by any means. Capacities are still underutilised and not running at a profit. Capacity utilisation, at 74.8 percent at last count, remains well below average. Revenue in the first nine months of the year was 2.2 percent down year on year. In the
face of intense international competition, companies are not managing to pass on the high production costs to customers in full, squeezing profit margins further. Sentiment among companies in the industry has accordingly taken a definite turn for the worse with many chemical and pharmaceutical companies reporting a deterioration in current business.
Business prospects have also clouded over again. Hopes that had arisen in the first few months of the year that better times were coming have withered. The industry is now expecting business to deteriorate in the upcoming months. In few of the weak third quarter and more pessimistic prospects for the final quarter of the year, the German chemical industry association, the VCI, is downwardly adjusting its growth forecast, down to two percent growth in 2024 overall. The production of chemicals (excluding pharmaceuticals) is expected to increase by 4.5 percent. Industry revenue in 2024 overall is set to fall two percent, down to around 221 billion euros, with revenue both at home and abroad downward.
Exports: foreign demand also weak
Foreign trade has not contributed positive momentum according to the latest figures. Foreign revenue from January to September was at around one percent less than in the same period last year and the situation is set to remain difficult in the next few months. The whole European chemical and pharmaceutical industry is facing similar problems to its German counterpart. Industrial production was downward in the EU according to the most recent figures and there is no turnaround in sight. Although economic momentum is higher outside of Europe, in many cases, this is not true of the industrial sector. The purchasing managers’ index for manufacturing shows that business prospects for industry have not improved in large parts of the world. Hopes of an upturn have been put on hold further. The global demand for chemicals is not set to pick up much in the next few months. German exporters of chemicals are also under pressure due to the recent drop in their competitiveness in terms of price.
Contact: Christiane Kellermann / Phone: +49 69 2556 1585 / Mail: kellermann@vci.de
German electro and digital industry suffering from weak industrial activity
The German electro and digital industry has long benefited from the transformation towards more automation, electrification and digitalisation, outperforming much of the German manufacturing sector between 2020 and 2023. In 2024, however, the weak momentum in key customer industries has caught up with the electro industry. The deteriorated economic situation is reflected in almost all relevant indicators. Price-adjusted production of the German electro industry was 9.8 percent lower than last year. Revenue (in nominal terms) over the first three quarters was 7.1 percent down on year on year. Capacity utilisation was down to 74.4 percent. Capacity utilisation has not been anywhere near this low since the middle of the Covid pandemic (at the start of Q3, 2024).
There are no signs of a rapid turnaround yet. Incoming orders between January up to and including September 2024 were 10.2 percent lower year on year. It is no surprise then that 57 percent of companies surveyed by the ifo Institute currently identify a shortage of orders as the largest obstacle to increasing production. Furthermore, sentiment among companies has deteriorated continuously throughout the year so far. At the start of the year, business expectations measured by the ifo barometer were positive with hopes high that the upturn would set in in the second half of the year. The
majority of electro companies are now pessimistic about their business prospects for the next six months (balance in October at minus 23.6 percentage points). The rating of current business has deteriorated almost continuously since the beginning of the year (balance in October at minus 27.5 percentage points).
Although momentum in the industry has been on the decline since summer 2023, German electro and digital companies have hardly reduced their workforce at all. At the end of August, 894,000 people worked in the German electro industry. This represents a decrease of only 1.4 percent year on year, much less than the reduction in production. However, 31,000 workers are again on short-time work. The size of the workforce has probably remained so stable mainly because companies are well aware of the challenges that demographic change will entail for them. In the space of the next ten years, the industry will have to replace an estimated quarter of its current workforce.
On the basis of the figures outlined above, the German Electro and Digital Industry Association (ZVEI) has downwardly adjusted its forecast for production in 2024 overall, from minus two to minus seven percent in real terms.
Lower exports in almost all key destinations apart from China
Nominal exports of the German electro and digital industry fell by 3.5 percent in the first eight months of 2024 year on year. Looking at the ten countries that received the most German electro and digital exports, China was the only one that received more exports year on year (up 3.5 percent) and this increase is probably largely a rebound from the decrease recorded last year. Exports to the United States were only slightly down year on year in the first eight months of the year (down 0.3 percent), while German electro exports to the euro area were 7.3 percent lower than last year.
Contact: Matthias Düllmann / Phone: +49 69 6302 329 / Mail: matthias.duellmann@zvei.org
Foundry industry: all-time low
In the first three quarters of 2024, production in the foundry industry was down 9.9 percent to 2 719 million tonnes. Iron and steel foundries produced 11.8 percent less while nonferrous metal foundries produced only three percent less, reflecting the structural trend towards lightweight construction. Nonetheless both sectors trended similarly in terms of revenue, with decreases slightly over ten percent in both cases. In the first eight months of the year, industry revenue fell 12.1 percent down to 8.453 billion euros. This reflects the higher dependency of nonferrous metal foundries on carmakers and is why the drop in revenue is similar even though the decrease in production is much less pronounced.
The growth forecast for the year overall for the industry, in which 500-odd companies operate (according to the German Foundry Association, the BDG) employing around 70,000 people, has had to be downwardly revised from originally minus five percent down to minus eight percent in late summer on account of the poor performance in the course of the year so far. Even though production reached its highest level of the year in September and even if the fourth quarter is slightly stronger, it would mainly be due to the low base level of last year and minus eight percent is actually ambitious. A year on year
comparison is also not unproblematic given that last year was also a particularly bad year for the industry. Production in the German foundry industry in 2024 is currently around 30 percent lower than in 2018.
The ifo sentiment barometer plunged down a remarkable 20 points in October reaching an historic low. The shock of German Reunification, the financial crisis, the Covid pandemic – sentiment among German foundries has not been this low since 1991.
Not even one percent of the industry still rates its current business situation as good. The balance of good and bad ratings reached minus 80 points in October. Back in spring, the balance was only at minus 43 points. Prospects for the next six months have also tumbled 16 points over the same period and are currently at minus 65 points.
It is hardly surprising, then, that the quarterly figures have reached new lows. Capacity utilisation had dropped down to 69.8 percent by October and has not been this low since the first months of the pandemic.
An analysis clearly differentiating between structural and economic factors is not possible. The fact is that the order situation is a major problem for much of the industry. While a substantial backlog of orders kept many companies in the industry relatively busy in 2023 despite a low level of incoming orders, this is not the case anymore in 2024. As the turnaround in demand originally expected in the second half of the year has not materialised, German foundries are now under considerable, and in part existential, pressure.
Foundries are not just struggling with low demand but also with volatile customer behaviour, making production planning very problematic. The low level of interest shown by investors in Germany is a large stumbling block for the foundry industry as its components are used in a wide range of different sectors. Another problem is the continuously high electricity prices that continue to distort international competition. Yet further compounding the situation is the increase in grid fees – German foundries are still paying much more than their foreign competitors.
Contact: Dr. Tillman van de Sand / Phone: +49 211 6871 301 / Mail: tillman.vandesand@bdguss.de
Glass industry: momentum very low with no improvement in sight
The ifo business climate index for the glass industry has remained at a very low level since May 2023 and the situation had not improved by October 2024. To the contrary, business sentiment dropped to 73.8 points, which represents a decrease of 7.1 points compared to September (80.9 points) and is the worse result since 1993. The ifo index for the whole economy, meanwhile, recorded a slight rise in October which means that the glass industry is moving against the overall trend. The drop in sentiment was fuelled mainly by the rating of the current situation and business prospects in flat glass and hollow container glass. The situation in glassware and special glass, in contrast, was positive. The business climate index here rose by 9.1 points compared to the previous month. Figures on revenue and production published by the Federal Statistical Office and surveys conducted by the German glass industry association, BV Glas, support the ifo results. Revenue in the industry decreased by a total of 11.4 percent from January to August 2024, while revenue following price
adjustment dropped 6.1 percent. Total production in the first six months of 2024 amounted to three million tonnes, which was 10.4 percent less than in the same period last year. The glass industry has been very robust over the last few years, weathering the Covid crisis and gas shortages relatively well Since spring 2023 this is no longer the case.
Demand has dropped considerably both at home and abroad. Domestic revenue decreased 14.2 percent between January and August 2024 year on year, while euro area sales declined 9.4 percent and sales from outside the euro area dropped 4.9 percent. The reasons for the downturn are manifold. In the case of the flat glass and glass wool segments, the problem is the weak level of construction activity and uncertainties in the automotive sector. In the hollow container glass segment (packaging glass for food and drinks), the export of empty and filled glass packaging in the EU 27 has plunged. Not only has the export of glass packaging tumbled, but the import of glass packaging has as well. A close analysis of the figures shows that this is a European problem affecting almost all EU27 countries, triggered by the reduction in storage capacities along the whole value chain right up to retailers Consumer reticence is another factor. The overall European market for glass packaging has shrunk. Notwithstanding the reduction in exports in hollow container glass, domestic sales are decisive for the whole industry. Domestic sales continue to be weak and even dropped down further at last count compared to the previous month. Injecting momentum in the domestic market would be an important step forward and policymakers finally need to make this happen. Measures needed include competitive electricity prices and grid fees for the energy-intensive industry to support its transformation and competitiveness, also with regard to competitors within the EU.
Contact: Dr. Johann Overath / Phone: +49 211 9022 7821 / Mail: overath@bvglas.de
Ceramics industry
Between January and September 2024, fine ceramics recorded a minimal increase in revenue of 0.2 percent. Based on the steep reduction in incoming orders, 2024 is set to be a year of downward revenue. Technical ceramics is particularly affected, with incoming orders down by 8.9 percent. Dinnerware producers are also likely to see downward revenue in 2024 although private consumption may yet inject positive momentum here over the Christmas season. In 2024 overall, production in the fine ceramics industry is heading for a contraction of five percent. For the year ahead, production is expected to drop a further two percent.
The results of sanitary ceramics have not been included in the industry’s figures due to competition rules. The recession is affecting all segments of the ceramics industry related to construction. Some tile producers have become insolvent. The ceramics industry in Germany is almost exclusively comprised of operators of small plants within the meaning of the German carbon pricing scheme, the BEHG. With this national scheme, policymakers have created competitive disadvantages for the fine ceramics industry in Germany, and these are set to increase further as of 1 January 2025. Germany still has no effective carbon leakage protection for energy-intensive small and medium-sized businesses.
Contact: Dr.-Ing. Markus Küster / Phone: +49 9287 808 25 / Mail: m.kuester@keramverband.de
Aviation
Between January and September 2024, aviation companies have continued to recover from the difficult Covid years but are still clearly lagging behind the rest of Europe. At the same time, the industry is working to advance efforts to defossilise aviation.
Trend in air travel: In 2024, air travel in Europe has continued to recover from the slump triggered by the pandemic. The number of seats available to, from and within Europe (EU / EEA / UK) between January and September was 99 percent as high as in the pre-crisis summer of 2019. Excluding travel to, from and within Germany, the recovery was already at 103 percent; in travel to, from and within Germany, seats available were only at 85 percent their pre-crisis level. Year on year, air travel in Germany was up by nine percent, in Europe by eight percent.
The trend in passenger numbers followed the same trajectory as available seats. In 2024, German airports recorded 161 million passengers which corresponds to 83.7 percent of the pre-crisis level and year on year growth of 7.8 percent. The main drivers of this development are the following:
▪ European point-to-point carriers are increasingly shifting their fleets and business activities to airports outside of Germany. Carriers are moving their flights away from German cities because of the steep increases in public charges and fees in 2024 imposed in Germany such as aviation tax, aviation security fees and flight security fees. These charges and fees on air travel in Germany have become considerably higher than in other relevant European countries and has led to a decrease in the number of flights available to and from German airports. German economic hubs have thus lost a considerable amount of their intercontinental and European connectivity, greatly reducing their appeal.
▪ Local air travel within Germany has shrunk considerably since 2019: the volume of passenger demand in this segment at 17.8 million passengers is still at only 50.8 percent of its pre-crisis level and 4.4 percent higher year on year. Traffic has shifted to rail or road particularly in the case of decentral routes that are not connected to Germany’s main international airports, Frankfurt and Munich. Seats available here from January to September 2024 were only at 22 percent compared to 2019 and down twelve percent year on year.
▪ Long-distance air travel is also affected by the regulations distorting competition. In the major market segment Germany-Asia, the shift towards hubs outside of the EU such as Doha, Dubai and Istanbul that has been observed for several years is continuing.
Tourist travel, in contrast, continued to trend upwards with intercontinental flights also displaying high momentum. The demand for air freight between January and September 2024 expanded 2.1 percent compared to the same period in 2023 and was only 0.4 percent below the same period in 2019. Prospects for the winter season 2024, which covers the period from November 2024 to March 2025, are positive with six percent more seats available than in the same period last year. This would correspond to 84 percent of the 2019 level.
Contact: Dirk Helf / Phone: +49 30 5200 771 45 / Mail: dirk.helf@bdl.aero
Machinery manufacturing: small upturn on the horizon
In the first nine months of the year, production in the machinery and plant manufacturing sector in Germany was 7.5 percent lower year on year following price adjustment The nosedive in incoming orders has not bottomed out yet according to the latest figures available from September 2024. More and more companies are finding it difficult to prop up production with orders in hand. Capacity utilisation is suffering. While capacities were still running at 85.9 percent in October last year, not far below the long-term average (86.1 percent), they were down to 79.1 percent by October this year Capacity utilisation is now well below the long-term average of 85.9 percent and also far below the 50-percent scatter range that extends from 84.1 to 89 percent. In October, 52 percent of companies rated their technical capacity as too big, while only five percent reported their technical capacity as too small. A shortage of orders was rated the biggest impediment to increasing production, while the percentage of companies suffering from material shortages had gone down to only six percent. Exactly one fifth of machinery manufacturers would be able to expand production if they had more skilled staff. In view of the demographic situation, companies in the industry will do all they can to keep their long-term workers. With tried and tested tools at their disposal, including the reduction of overtime using working time accounts, short-time work and the reduction of temporary staff, this should prove possible by and large. In August, the size of the industry’s workforce stood at 1,024,000, only 0.3 percent smaller than one year ago
Looking ahead to 2025, the economists of the German association of machinery manufacturers, the VDMA, expect production levels to fall by a further two percent in real terms. The downtrend is expected to bottom out in the first quarter of the year, after which a moderate upturn should set in. As the pace of recovery is likely to be gradual with production only turning up in the second quarter, the overall result for the year will again be down on the previous year, albeit only just. The recovery of production next year will largely depend on two factors. First, monetary policy, already less restrictive, is expected to ease in many countries around the world which should boost the propensity to invest Second, increasing real incomes in many countries will boost private consumption and, in turn, indirectly provide upwind to capital goods. The VDMA economists do not anticipate a strong upturn as fiscal policy will not be able to spur on recovery as it has done in many earlier cycles. In some countries, including the United Kingdom and France, it is even likely to have a restrictive impact. Furthermore, the global economy will continue to be beleaguered by wars, geopolitical disputes and drifts towards deglobalisation.
Contact: Olaf Wortmann / Phone: +49 69 6603 1373 / Mail: olaf.wortmann@vdma.org
Nonferrous metal industry: production stuck on low level
In October, the situation of the German nonferrous metal industry was worse than one year ago. About every second company reported a shortage of orders in the industry’s latest survey. Workers were on short-time work in around 30 percent of companies. Eight percent of companies nonetheless reported a shortage of workers. A total of seven percent of companies, mostly smelters and remelters, complained about shortages of inputs such as scrap metal. In the first six months of 2024, the industry generated a revenue of 32.5 billion euros with a combined workforce of 107,000 employees and 630 companies. Domestic sales accounted for around half of the revenue and represents the industry’s biggest market. The nonferrous metal industry is divided into the following stages of the value chain:
production (raw metal), semi-finished products (ribbon, sheets, rods, profiles, pipes and wire), further processing (foil, thin ribbon, tubes, aerosol cans, other cans and powder), casting and hot-dip galvanising Among the producers of raw aluminium, the producers of primary aluminium recorded the smallest drop in production. From January to June 2024, they produced a good 1.4 million tonnes which is only two percent down year on year. In the same period, the production of semi-finished aluminium products totalled 1.2 million tonnes, down four percent compared to the first six months last year. Production in the aluminium further processing segment was two percent less than in the first six months of 2023, down to 158,000 tonnes In the copper industry, producers of semi-finished rolled extruded and drawn copper and copper alloy products saw production drop five percent year on year, down to 329,000 tonnes. The production of lead, zinc, nickel, tin and alloys expanded to 238,000 tonnes. That represents an increase of 51 percent compared to the first six months of 2023, which was beset with such high electricity prices that production was curbed and, in part, shut down. In the same period, the output of producers of semi-finished products of zinc, nickel, lead, tin and other nonferrous metals rose two percent, up to 71,000 tonnes. The nonferrous metal foundry industry produced 428,000 tonnes of cast parts in the first six months of the year, three percent less than in the same period in 2023 The current low reach of orders in hand in conjunction with the shortage of new orders will keep production at its current low level throughout the first six months of 2025.
Foreign trade: exports more robust than domestic demand
Foreign sales of the nonferrous metal industry amounted to 16 billion euros in the first six months of 2024. The proportion of exports rose to around 50 percent. Germany has been a net importer not only of ores and concentrates but also of crude metal for many years now. This means that the country imports considerably more crude metal than it exports, reflecting the dependence of German industry on imports from abroad of some raw metals such as aluminium, nickel, zinc, tin and several rare metals The import of raw metal dropped five percent in the first six months of 2024 year on year, down to 1.8 million tonnes. Exports of raw metal, on the other hand, increased by five percent in the same period up to 470,000 tonnes. Regarding semi-finished products, Germany was a net exporter as in 2023. In the first six months of 2024, exports of semi-finished goods again exceeded the imports of semi-finished goods. Exports only fell five percent, down to 1.1 million tonnes, while imports dropped ten percent, down to 950,000 tonnes
Contact: Oliver Eisenberg / Phone: +49 30 726207 167 / Mail: oliver.eisenberg@kupfer.de
Paper and pulp industry: 2024 set to be another challenging year
The development of the German paper and pulp industry in the first three quarters of 2024 was marked, on the one hand, by a moderate uptrend in production, and, on the other hand, by lower revenue than in 2023 with divergent trends in revenue among the individual segments.
From January to September 2024, the production of paper, paperboard and cardboard increased by 4.7 percent year on year to a total of 14.6 million tonnes. The total volume sold rose by 3.7 percent, also amounting to 14.6 million tonnes. The revenue of the pulp and paper industry in the first three quarters of the year was 3.8 percent down year on year. 2023 saw the production of paper sink to its lowest level in the last 20 years and revenue crash 27 percent, down to 15.5 billion euros. The
moderate upturn this year so far has not managed to compensate for these losses and the situation in the industry remains tense
Production trends in individual segments divergent
The production upturn experienced by the industry in 2024 so far is attributable to growth in the packaging and technical and special paper segments. The industry’s largest segment, paper, paperboard and carboard for packaging, increased production by 6.6 percent in the first three quarters compared to last year, up to 9.4 million tonnes. Production of technical and special paper expanded four percent up to 1.1 million tonnes. Graphic paper recorded an increase in production of 1.1 percent up to 3.1 million tonnes, following a massive 30.5 percent slump in production the previous year, reflecting receding demand in the face of digitalisation. The production of sanitary paper items has nudged up 0.4 percent in 2024 so far.
Economic lull in Germany weighing down domestic trade
The economic lull in Germany is weighing heavily on the paper and pulp industry and has caused very divergent trends in domestic and foreign trade. In the first three quarters of 2024, domestic sales stagnated at last year’s low level (up 0.6 percent) while foreign sales rose 6.9 percent. This upturn was also fuelled largely by growth in the export of packaging and technical and special paper
The German paper and pulp industry remains in an extremely challenging situation in 2024. Momentum at home is still weak and demand low. High costs for energy and raw materials as well as structural changes that have massively reduced the demand for graphic paper continues to burden the industry in 2024.
Contact: Dr. Thomas Moldenhauer / Phone: +49 171 3158 542 / Mail: t.moldenhauer@papierindustrie.de
Pharmaceutical industry: back on course thanks to vaccine drives
The German pharmaceutical industry is in a good position compared to other industries. Over the summer, substantial decreases in the production of pharmaceuticals seemed to indicate that this key industry was also about to falter but these results need to be seen in perspective. The industry is still getting back to normal after the huge demand for vaccines in 2021 and 2022, which lifted domestic revenue in part by as much as 50 percent compared to average pre-crisis levels. With demand for vaccines waning last year, domestic sales were down by one fifth and production by three percent.
The unusually strong waves of illness over the winter months 2023/2024 only temporarily buoyed production and revenue above normal levels. Since spring, production and revenue have gradually started to drop and have now largely returned to normal levels. Domestic revenue should now hold steady while foreign sales recover from the recent weak period and should then remain upward. All in all, this year will again see revenue and production at a lower level than last year as vaccine levels return to normal
With production pointing upwards, the industry is continuing to increase its workforce. After strong growth in 2023, the workforce is again set to expand tangibly this year, considerably more than across
the economy overall. This uptrend will continue next year. The pharmaceutical industry is continuing to invest in Germany as a business location. Investment levels did drop by almost two percent in 2022 (latest figures available). However, at that time, profit margins and, in turn, the scope for investment, were severely constricted on account of the energy crisis. Soaring energy prices brought input prices up with them while the sales prices for most pharmaceutical products are fixed. Costs have got back to normal since then and companies can now be expected to expand their investments again apace with their growing workforce. Pharmaceutical companies surveyed by the German association, Stifterverband, planned to substantially increase their research and development spending last year, at least, which is closely connected to investments in this research-intensive industry.
Contact: Dr. Simon Junker / Phone: +49 30 2060 4511 / Mail: s.junker@vfa.de
Steel and metal processing: production down 7.1 percent in 2024 year on year after three quarters
With a decrease in production of 7.7 percent year on year, the third quarter 2024 has turned out to be the weakest quarter in 2024 so far. Production has continued to decline from quarter to quarter and has not in a single month come close to last year’s level. The total drop over the first seven months of 2024 compared to the same period in 2023 was 7.1 percent. September did see production increase by 9.3 percent over the previous month of August which was a welcome positive sign
Capacity utilisation in October was another 3.5 percentage points lower than in July and ten percentage points lower than the long-term average. After holding out for the last three years and not letting go of skilled workers despite lower production and capacity utilisation, companies in the industry have now started reducing their workforce considerably, especially as the trend in incoming orders does not indicate any relief in the short term. In the first nine months of the year, incoming orders were 12.3 percent down on the same period last year.
Despite these negative indicators, sentiment among steel and metal processors in Germany improved in October. Companies rated current business with 3.1 balance points, and prospects as high as 11.4 points. Although the proportion of companies that rate their current situation as good has now dropped below ten percent, at the same time, fewer companies rate their current situation as bad. The proportion of companies surveyed that expect to see their situation improve in the next six months increased from 5.1 percent to 6.3 percent while the percentage of companies that are pessimistic about their future prospects dropped from 47 to below 40.
Companies are endeavouring to withstand the negative trends and are confident about the strengths of their business models and their workforce. Policymakers and society are nonetheless called upon to stop endangering the competitiveness of Germany as a business location but rather promote its competitiveness through deregulation and targeted assistance to bring about new growth and the transformation
Contact: Holger Ade / Phone: +49 233 1958 821 / Mail: hade@wsm-net.de
Steel industry: Germany lags further behind
Demand reaches low in 2024 postponing hopes for a recovery
The steel industry is facing existential challenges in 2024. High electricity costs at home are weighing down its performance on the global level particularly The unchecked rise in surplus capacities globally has produced a huge pressure on the EU steel market to import steel, particularly from China. Even though demand in Germany and the EU is low, the import ratio of steel is at an unprecedentedly high level.
In Germany, the production of crude steel is still at a low level despite increasing four percent year on year in the first three quarters of the year. This corresponds to an annual volume of only about 38 million tonnes of crude steel from January to September. The annual volume has remained below 40 million since 2018.
A major worry is the weak demand for steel in Germany, which reflects the slump in German industrial momentum and in construction. The global steel association, worldsteel, forecasts a reduction in the market supply in Germany (down seven percent) for the third year running. Since its last high in 2017, the market volume in Germany has dropped by around 35 percent. Germany’s performance is considerably worse than other industrialised countries (United States: down nine percent; EU 27: down 17 percent; Japan: down 19 percent). In the same period, the global steel market even increased by seven percent, fuelled by India (up 62 percent) and China (up twelve percent). In the ranking of the top steel markets, Germany has fallen from sixth to ninth place in this time
A proper recovery is currently not in sight given the expected development in the key customer industries in Germany and the EU. For 2025, a technical stabilisation of steel demand is on the cards as inventories are low and not expected to get any lower.
Contact: Bernhard Krischer / Phone: +49 211 6707 963 / Mail: Bernhard.Krischer@wvstahl.de
German textile and clothing industry in unsatisfactory situation
The economic development of the textile and fashion industry has been disappointing in 2024 so far. All key indicators including revenue, production and workforce are downward. The downtrend has permeated both the textile industry and the clothing industry, which was still posting solid growth until the end of last year but has proven unable to carry the upturn into the current year. Total revenue for the industry dropped 4.9 percent in the first eight months of 2024 with the workforce contracting by 4.2 percent on average. Production also pointed down, decreasing 2.8 percent in textiles and 13.7 percent in clothing, though considering last year’s good result pronounced drops here are not surprising Incoming orders showed a similar pattern, down 1.6 percent in textiles and 5.2 percent in clothing
The reasons for the weak figures have shifted compared to last year. While the high energy prices and, in part, exorbitant price increases in raw materials were the main downward factor in the past, it is now weakening demand, both at home and abroad. This shift also explains why the more energy-intensive textile industry which is more dependent on petrochemical inputs was affected to a greater degree in
the past than the consumer-related clothing industry. While input and energy costs have since dropped down from their peaks, easing conditions for the textile industry, the lull in consumption is now burdening the whole industry with momentum from abroad also lacking.
The revenue of retailers in the clothing industry was unsatisfactory, down 1.6 percent as of August, while revenue in retail overall increased 1.8 percent. The exports of clothing producers were also down by 2.7 percent in the first eight months of 2024, while exports of textiles were all of 7.2 percent lower. As a supplier to other industries, the textiles industry is also affected by falling demand in other industries, particularly the automotive sector
The short-term prospects of the industry have deteriorated markedly in the course of the year so far. The ratings of textile companies, in particular, are trending negative in line with overall downturn sentiment in the manufacturing sector. According to the latest figures, textile producers have become slightly more optimistic but still on a very low level. In both segments, the latest surveys clearly identify the main problems currently as domestic demand, foreign demand and the economic policy framework (bureaucracy). Companies are also increasingly critical of the rising labour costs. Energy and raw material costs remain high and problematic, while logistic costs have eased considerably compared to last year.
Contact: Marcus Jacoangeli / Phone: +49 30 7262 2024 / Mail: mjacoangeli@textil-mode.de
Imprint
Federation of German Industries e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu
German Lobbyregister Number R000534
Author Thomas Hüne T: +49 30 2028 1592 t.huene@bdi.eu
Editorial / Graphics
Dr. Klaus Günter Deutsch T: +49 30 2028 1591 k.deutsch@bdi.eu
Marta Gancarek T: +49 30 2028 1588 m.gancarek@bdi.eu
This report is a translation based on „Industriebericht | Industrieproduktion und Handel nach Branchen“, as of 22 November 2024.