German industry is becoming somewhat similar to Japanese, where rapid growth ended in the 1990s, with peak production in 2007, followed by a ~30% decrease to 1980s levels, including the impact of the Fukushima energy deficit and nuclear plant closures.
Bloomberg: Germany’s Days as an Industrial Superpower Are Coming to an End. Reasons:
- Competition with the USA: U.S. subsidies are increasing, and Germany is struggling to counteract this trend;
- Competition with China, which is becoming less of a voracious importer of German goods;
- Loss of cheap Russian energy, impacting energy-intensive sectors;
All of this is happening against the backdrop of political "paralysis" in Germany, a labor shortage, and a deteriorating education system. Subsidies are gradually diminishing, and energy prices for industry have more than doubled, now among the highest in the EU and growing faster than in most countries.
While the decline varies (some places closing production, others reducing volumes, and some relocating to other regions), recent production data indeed show a consistent trend of contraction -1.6% month-on-month and -3.0% year-on-year. On average, since 2023, the industry has contracted by 1.5%.
In energy-intensive sectors, production declined by 5.8% month-on-month and 10.2% year-on-year in December, with a 22.5% decrease since December 2021. Although this sector is not critically large (around 17% of production), the concern lies in the persistently negative trends in the overall industry.
