20. Februar 2024
Two large German industrial sectors have experienced significant losses in domestic production during the last few years: the automotive and the chemical industries. In the automotive industry, production level in Q4 2023 was 21% below the former peak reached in autumn 2017. Chemical output in Germany was 27% lower than at its the former peak.
Compared to the significant drop in domestic production, employment in both sectors has remained quite stable during the last few years. The number of employees in the automotive industry declined moderately between 2018 und 2022 but has stabilised since. Employment in the chemical industry was even only 2% below its peak at the latest reading.
In our view, production volumes in both sectors are unlikely to return to former peaks. Thus, we expect employment in these sectors to decline before long, as an adaptation to lower production volumes and probably also as a result of more automatisation and efficiency gains. [mehr]
19 February 2024 Deutsche Bank Research Europe Germany Economics Germany Blog Date Employment likely to decline in sectors faced with structural challenges n Two large German industrial sectors have experienced significant losses in domestic production during the past few years: the automotive and the chemical industries. In the automotive industry, the production level in Q4 2023 was 21% below the former peak reached in autumn 2017. Chemical output in Germany was 27% lower than at its former peak. n Compared to the significant drop in domestic production, employment in both sectors has remained quite stable during the past few years. The number of employees in the automotive industry declined moderately between 2018 and 2022 but has stabilised since. Employment in the chemical industry was only 2% below its peak at the latest reading. n In our view, production volumes in both sectors are unlikely to return to former peaks. Thus, we expect employment in these sectors to decline before long, as an adaptation to lower production volumes and probably also as a result of more automatisation and efficiency gains. Figure 1: Employment still quite stable despite structural problems 40 50 60 70 80 90 100 110 120 2015 2016 2017 2018 2019 2020 2021 2022 2023 Production chemical industry, sa Production automotive industry, sa Employees chemical industry Employees automotive industry Germany, 2015=100, 3M moving average Source : Federal Statistical Office Eric Heymann Senior Economist +49-69-910-31730 Deutsche Bank AG IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. MCI (P) 041/10/2023. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS. 19 February 2024 Germany Blog Page 2 Deutsche Bank AG Two large German industrial sectors have experienced significant losses in domestic production during the past few years: the automotive and the chemical industries. Automotive production including suppliers had started to decline before the COVID-19 pandemic due to weak global car demand. During the pandemic, shortages in intermediate goods (semiconductors) and disruptions of value chains precluded a sustainable recovery. What is more, some assembly plants have been retrofitted for the manufacture of electric cars. This has reduced available production capacity. Suppliers with a strong focus on producing parts for cars with an internal combustion engine have also started to adapt their product portfolio. Furthermore, some German car makers have withdrawn somewhat from the volume car segment not least due to cost factors. While the automotive industry made up for some of the declines from previous years with consecutive output increases in 2022 and 2023 (+4% and +11%), the production level in Q4 2023 was still 21% below the former peak reached in autumn 2017 (based on 3M moving average, see Figure 1). Compared to most other industrial sectors in Germany, production losses due to COVID-19 were less severe in the chemical industry. The sector was also able to almost return to pre-pandemic levels shortly after the first COVID-19 shock. However, the chemical industry was hit harder by the war in Ukraine and the new energy world that followed, which is characterised by lower German absolute gas imports and higher energy prices compared to pre-war levels and compared to the US and China. Domestic chemical production in Germany declined by 12% in 2022 and by another 11% in 2023, despite stabilisation in the course of 2023. In Q4 2023, chemical output in Germany was 27% lower than at its former peak, reached back in early 2007. This shows that the chemical industry had not been a growth sector in Germany before the war. Stable development of employment is a sign for lower productivity Compared to the significant drop in domestic production, employment in both sectors has remained quite stable during the past few years. The number of employees in the automotive industry declined moderately between 2018 and 2022 but has stabilised since. Employment in the chemical industry was only 2% below its peak at the latest reading. It is the usual pattern that employment is a lagging indicator during an economic cycle: Companies are usually not able to lay off employees right at the beginning of a cyclical downturn due to statutory notice periods. Given the persistent shortages of skilled labour in many sectors, companies have also tended to keep the major share of their labour force even in a downturn (labour hoarding). Generous public short-time work regulations in Germany have supported that approach, especially during the pandemic, and played a role until late. Contracts between companies and trade unions to secure employment at certain production sites may also have prevented job cuts. Still, the discrepancy between domestic production and employment, which has widened after the pandemic, is an indicator of declining productivity in the two 19 February 2024 Germany Blog Deutsche Bank AG Page 3 sectors. 1 In our view, production volumes in both sectors are unlikely to return to former peaks (see our recent Germany Blog on manufacturing in Germany). Thus, we expect employment in these sectors to decline before long, as an adaptation to lower production volumes and probably also as a result of more automatisation and efficiency gains. 1 Indeed, this interpretation needs to be put into perspective to a certain extent since the production index underrates the development of gross value added in the industry, according to a recent ifo report ( in German only ). This is attributable to a declining share of intermediate consumption (which is part of the production index but not of gross value added) in the production value and other statistical aspects. 19 February 2024 Germany Blog Page 4 Deutsche Bank AG Appendix 1 Important Disclosures *Other information available upon request *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. 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