Unveiling the Struggles: German Industry's Slipping Competitiveness
German industry losing competitive edge: results from B tests suggest decline - Decline in Competitiveness of German Industry: Results from Recent Survey
The global trade landscape is undergoing significant shifts, as Klaus Wohlrabe, head of Ifo surveys, elucidates. The German industry, unfortunately, continues to grapple with competitiveness issues. In the metal manufacturing sector, a troubling 43.3% of companies reported a decline in competitiveness in April, bumping up from 37.8% in January. The automotive sector, too, saw a dip, albeit smaller, from 42.5% to 33%.
German companies within the European Union appear marginally less concerned about losing competitiveness, with the percentage falling from 20.9% in January to 13.4% in April.
Insights
- Global Market Challenges: The metal production and processing sector is grappling with a slew of global competition challenges. These challenges, intensified by ongoing trade disputes and changing trade dynamics, have contributed to a hike in the number of companies reporting reduced competitiveness from 37.8% to 43.3%[1][2].
- Sectoral Impact: The industry's slump is part of a broader trend where German industries are losing ground in global markets. The automotive sector also showed signs of struggle, though to a slightly lesser degree, with 33% of firms experiencing a decline in competitiveness[2].
- Improvement within EU: Despite the global market challenges, there was a minor improvement in the perception of companies regarding their competitiveness within the EU. The share of companies reporting reduced competitiveness fell from 20.9% to 13.4%[2], suggesting a temporary stabilization in their position within the European market.
The Big Picture
The Ifo Business Climate Index inched up to 86.9 in April 2025, signaling a marginal uptick in business sentiment[4]. The Manufacturing PMI also showed a small increase in output and export orders. However, manufacturers remain wary about the future, with ongoing workforce reductions[5]. This mixed picture indicates both challenges and potential for growth in specific sectors. The overall economic indicators, meanwhile, remain muted, with modest growth forecasts of 0.2% for Germany's GDP in 2025[2].
The German industry's struggles to maintain competitiveness in the global market can be linked to the challenges posed by ongoing trade disputes and changing trade dynamics, as found in the metal manufacturing sector where an increased number of companies reported decreased competitiveness. The employment policy of businesses, aiming to adapt to these trade-related issues, might play a critical role in regaining lost competitiveness.
The finance department of these businesses, with their strategic financial plans, will need to consider the sectoral impact of the industry's slump and the global market challenges, in order to ensure a stable position for the companies within the European Union and global markets.
