Capital IdeasTM

Investment insights from Capital Group

Categories
Manufacturing
Can Europe’s largest economy adapt to a shifting global landscape?
Robert Lind
Economist

As the world rapidly digitises and the automotive industry embraces electric cars, Germany risks falling further behind countries such as China that have developed their technological capabilities. On a comparative basis, Germany’s labour costs exceed other manufacturing regions. Adding to its struggles is stagnant labour productivity as Germany’s aging population retires or shifts to part-time work. This trend doesn’t bode well given Germany’s historic strength producing leading-edge automobiles and dominating the manufacturing of equipment, chemicals and pharmaceuticals.  


However, in spite of intensifying concerns around deindustrialisation, German manufacturing is quickly adapting to the new economic paradigm.


Germany had previously imported over 50% of its natural gas from Russia. Manufacturing output declined by much less than was feared, and GVA rose by 0.25% last year. Germany has been able to source gas from areas such as Norway and the Netherlands, while also developing its own liquefied natural gas infrastructure.  Germany has also gained ground in trade with the eurozone, the US and other parts of the world.


German firms seek to broaden trade partners

Contributions to German export growth

Contributions to German export growth

Data as at 31 March 2024.  Source: International Monetary Fund Direction of Trade Statistics


Robert Lind is an economist with 36 years of industry experience. He holds a bachelor's degree in philosophy, politics and economics from Oxford University.


Hear from our investment team.

Sign up now to get industry-leading insights and timely articles delivered to your inbox.

By providing your details you are agreeing to receive emails from Capital Group. All emails include an unsubscribe link and you may opt out at any time. For more information, please read the Capital Group Privacy Policy

Past results are not a guarantee of future results. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.