E Serious Problems For Germany’s Manufacturing Sector, Auto Production Restructures In The Direction Of Electric Cars

In 2019 German manufacturing experienced its worst downturn in years, underlining that the engine of the Euro Zone’s biggest economy is only sputtering.

Germany's export-dependent economy has been seriously affected by the global economic slowdown, trade tensions related to China, the US, and Brexit, as well as by a sharp decline in automobile production, which has been disrupted by new emissions rules and the shift to electric vehicles. For example, as of October automobile production in Germany recorded a 14.4% year over year decline.

German automotive firms and their suppliers have announced that about 50,000 jobs will be lost or are at risk in Germany since their traditional businesses have become less profitable.

Trade concerns may have lessened a bit, particularly because of the "phase one" trade deal between the US and China and well as because of the somewhat clearer path for the formal exit of Britain from the European Union.

Nonetheless, Germany has had a terrible manufacturing performance in all of 2019. The reported Purchasing Managers' Index (PMI) for German manufacturing was only 43.7 in December, and since any reading below 50-mark indicates contraction, Germany’s manufacturing sector experienced a full year of contraction last year.  

As well, the latest German factory orders were equally terrible last year, and as the following chart shows, year-over-year orders recently were declining at around a 6% annual rate at year-end.

(Click on image to enlarge)

The IHS Manufacturing PMI For Germany

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Gary Anderson 7 months ago Contributor's comment

Trump could crush Germany prof, unless Germany moves to embrace China instead of playing the Trump game. Germany could play the Trump game and he could still crush them if reelected. Europe must view the USA as an adversary.

Norman Mogil 7 months ago Contributor's comment

Not so sure about Trump power. One of the largest BMW factories in the world is in Spartsburg in he Carolinias has over 10k workers. One of the reasons that US cannot follow through with tariff threats especially in Trump country.

As they say "it's complicated"

Arthur Donner 7 months ago Author's comment

HI Gary,

Thanks for your comment.

No doubt Trump can make Germany's problems worse.

But 2020 is an election year. My political guess is that he would want to avoid another trade dispute at this time. (After all, the China phase 1 was hardly a win for the US)