Germany: Industrial production almost returning to pre-crisis level
January 11, 2011
Germany’s manufacturing industry has recovered from the economic nosedive of autumn 2008 more quickly than originally expected. By the time the recession bottomed out in April 2009 production had been cut back by 24% in all. Three-quarters of this decline has been recouped in the meantime.
The trend is most visible in the cyclically driven capital goods sector: output had fallen by over 30% in segments such as chemicals, metals and electrical engineering – and by no less than 44% in the auto industry. Carmakers received a very substantial boost from government stimulus packages, though, and of course from the scrappage bonus in particular. As a result, the auto industry has now made up nearly 90% of the ground lost during the recession-induced slump. Along with the chemicals and plastics industries, which mainly produce inputs for other sectors, it is one of the sectors that have recovered most. By contrast, the mechanical engineering industry is considered a cyclical laggard that reacts only slowly to changes along the curve. It starts to benefit once industry resumes investment in new production capacities. This is why mechanical engineering output has so far only rebounded by slightly more than 50%. However, incoming order volumes indicate above-average growth for 2011.
German industry is unlikely to be able to maintain the rapid pace of recovery in 2011. The upswing is losing some momentum. Nevertheless, the manufacturing sector has the potential to match the pre-crisis level by spring 2012. This would mean that German industry might have digested the worst recession since World War II in the space of not more than four years. A few capital goods segments – automakers, plastics and chemicals – are likely to complete their recovery even before the end of 2011.