 The recent weakness in the German manufacturing sectorNo 902, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Abstract: This paper studies the weaknesses of the German manufacturing sector in recent years. Three factors weigh more heavily there than in the rest of the euro area. First, higher gas prices penalized German energy-intensive manufacturing firms more than those of other countries, owing to the German chemical sector's greater reliance on gas and strong interconnections with other energy-demanding industries. Second, the impact of weak global demand was stronger in Germany due to its higher trade openness. Third, the automotive sector – which has suffered a lacklustre demand since 2018, also as a result of the uncertainties surrounding the transition to electric vehicles and of the increasing competition from Chinese car manufacturers – is twice as relevant for manufacturing in Germany than for the euro area as a whole. An econometric analysis shows large spillovers from the German industry to the manufacturing sectors of other euro-area economies. All three of these root causes of German manufacturing weakness could have long-lasting effects if they remain unaddressed. Keywords: German economy; energy prices; foreign demand; industrial sector (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_902_24 Access Statistics for this paper More papers in Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC. |
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