Germany’s Economy Stumbles Again as Industrial Output Plunges
Germany’s long battle to revive its struggling industrial base took another hit in August, as new data revealed the steepest drop in factory production in more than two years.
Government statistics showed a 4.3% monthly decline in industrial output, dragged down by an 18.5% collapse in auto manufacturing. Analysts had expected a slowdown, but not a fall of this magnitude. Some officials blamed the timing of summer shutdowns and production shifts in the car industry, though economists say the weakness runs deeper.
The figures add to growing concern that the country’s manufacturing core – once the backbone of Europe’s economic strength – is being hollowed out by tariffs, energy costs, and fierce competition from China.
Cracks Widen in Germany’s Industrial Base
The car sector, historically a symbol of German efficiency, is increasingly becoming its weak link. BMW recently cut its financial outlook amid sluggish demand in Asia, while Bosch plans to shed 13,000 jobs in its auto-parts division. These setbacks underscore how vulnerable export-driven companies have become to shifting global trade patterns.
Economists are split on what comes next. ING’s Carsten Brzeski warned that the economy may already be on the edge of another recession, calling the numbers “a clear sign of structural fatigue.” Others, like Bloomberg Economics’ Martin Ademmer, believe growth might stabilize later in the year – though any rebound would likely be modest.
Political Pressure Mounts on Merz
For Chancellor Friedrich Merz, the slump is testing promises to reignite growth through deregulation and labor reforms. Critics argue that little tangible progress has been made, even as Bundesbank President Joachim Nagel calls for “urgent acceleration” of pro-growth measures and immigration reforms to attract skilled workers.
Despite the gloomy outlook, Berlin is expected to raise its 2025 growth forecast slightly to 0.2%, up from zero, with hopes of 1.3% growth in 2026. But government officials concede that global uncertainty and fragile industrial sentiment could easily derail that recovery.
“The latest data paint a mixed picture,” the Economy Ministry said in a statement. “Persistent trade and geopolitical tensions continue to weigh on confidence.”
After two years of contraction, Germany’s much-promised rebound remains elusive – and August’s production collapse suggests the road back to growth will be longer, and rougher, than anyone in Berlin would like to admit.
Source: Bloomberg
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