Germany – 2020-2021 scenario: a slow trudge out of recession for the manufacturing sector
- Recent economic trends
- Basis of our scenario
- Focus: automotive industry crisis & sector relations between countries
The decline in German industrial production seems to be ending, but the recovery in the sector is likely to be protracted, leading to a slow and gradual rebound of growth, which we estimate could reach 0.8% annual growth in 2020 and 1.1% in 2021. This process will be driven by sustained private consumption and public spending, but also by construction investment, which is still dynamic, while net exports could weigh less on growth.
Germany is a major player in global automotive production ($500bn), ranked No. 3 behind the US and China. As one of the leading manufacturing countries, Germany sets itself apart from its competitors by significantly cutting down on intermediate consumption in the production process, leaving more room for added value. Representing 82% of production in China, 76% in the US and 74% in Japan, intermediate consumption stands at just 67% in Germany. Conversely, added value makes up just 18% in China, 23% in the US, 25% in Japan, yet almost 32% in Germany. Germany owes the success of its automotive sector in part to the high percentage of added value versus its competitors.Philippe VILAS-BOAS, Economist