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German industry optimistic

Andreas Becker / cc
January 1, 2014

This time last year, German business leaders were quite pessimistic about the future. Now, though, there are signs that industry heads are going into the new year with confidence.

A worker's hands are shown next to a piece of machinery (c) picture-alliance/dpa
Image: picture-alliance/dpa

The Institute for Economic Research (IW) in Cologne has been taking the pulse of German industry since the 1950s - and right now, it says, things are looking pretty good. More than half the 48 trade associations it's surveyed confirm that the general mood is much better than it was this time last year. Even more are saying that they're optimistic about the future.

"All of the main branches of industry expect to increase production over the coming year compared to 2013," says the director of the institute, Michael Hüther. "This is also true of those that were still lagging behind a year ago, such as the car industry, the steel industry, the electrical industry or the chemical industry."

Banks are pessimistic

Only a few sectors are less optimistic, and there are few surprises here. One is mining, which has been winding down for many years now. Another is the financial sector, currently suffering the effects of the economic crisis, regulation and job cuts. The energy and paper industries are also down.

Man in bright orange overalls standing in the middle of the tracks in a grey underground mine (c) dapd
The mining industry is one of only a few in Germany that is less than optimistic about the futureImage: dapd

The rest, however, end the year on a happy note, mainly as a result of Germany's stable economy - and considerable growth is predicted for the coming year. However, there is unlikely to be an overall increase in jobs: Some associations are creating positions, while others are cutting back, so the job numbers are expected to remain the same. "This has to do with the fact that there's uncertainty about the regulation of the job market, in connection with the new government," says the IW director.

It's no surprise then that Hüther translates the study's results into political demands. His institute is financed by the associations and businesses it surveys, so it is part of his job to emphasize the concerns of German industry.

Work and energy

Anything that might increase the cost of employing people is unwelcome to employers, from the minimum wage to higher pension contributions. Energy costs are also high on their list of concerns. This, says Hüther, is one reason why, since the beginning of the new millennium, many companies have not been investing in Germany as much as they should. "With the energy costs we have today, we won't be able to keep industry in Germany," he warns.

Michael Hüther, director of the Institute for Economic Research (c) picture-alliance/ZB
Michael Hüther of the Institute for Economic Research says high energy costs are a concernImage: picture alliance/ZB

Under the new government, a single ministry will be in charge of the transition to more environmentally-friendly energy sources, rather than sharing that task between the two ministries overseeing the economy and the environment, as in the past. "[Incoming Economy and Energy Minister] Sigmar Gabriel has said that we don't gain anything if we push through the energy transition against the wishes of industry and of the people," says Hüther. "If jobs are lost, everybody loses."

The 2012 survey of German industries painted a very pessimistic picture. A year ago, not one of the associations believed that the situation would improve over the course of the year. Businesses were especially alarmed by the euro crisis.

There's not a hint of that in the current survey. Hüther explains that the pledge by Mario Draghi, the head of the European Central Bank, that he would do whatever it took to save the euro has reassured the business community.

German industry is very dependent on exports, and this is an area it's keeping a close eye on, as trade with the big emerging countries like China, India and Brazil is not growing as fast as expected. However, the IW says it doesn't see this as a cause for concern - perhaps because there's not much it can ask the government to do about it.

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