Germany’s Manufacturing Slump Deepens As Energy Costs Soar

New factory orders in Germany crumbled by 4% in September from August, official data showed on Friday, as German and European industries grapple with soaring energy prices and falling demand amid high inflation.

Real price-adjusted new orders in Germany’s manufacturing sector fell by 4.0% in September 2022 compared with August 2022, provisional figures from the German Federal Statistical Office showed.

While domestic orders slightly increased by 0.5%, foreign orders tumbled by 7.0% in September compared to August. New orders from the euro area plunged by 8.0% and new orders from other countries fell by 6.3%, the German statistics office said.  

According to the latest S&P Global / BME Germany Manufacturing PMI survey out earlier this week, the downturn in Germany’s manufacturing sector deepened in October. Manufacturers in the survey reported the steepest drop in output since May 2020 and a deepening decline in new orders, as conditions worsened amid growing concerns about the economic outlook and high energy costs.  

“There was further downward pressure on output levels at the start of the fourth quarter, with firms noting the influence of high energy costs and a deepening downturn in demand,” said Phil Smith, Economics Associate Director at S&P Global Market Intelligence.

The entire Eurozone manufacturing sector has tumbled into recession, with output falling at the steepest rate since the initial COVID wave as demand for goods plummets, the S&P Global Eurozone Manufacturing PMI survey also showed this week.

European industries are slammed by soaring energy costs so much that they are curtailing or shutting down production, losing global market shares, and risking permanent damage to Europe’s competitiveness. Surging natural gas and electricity costs have resulted in a jump in operational costs for all industries, from steelmaking and car manufacturing to textiles and clothing. As manufacturers are curtailing, shutting down, or relocating production, they risk never reopening in Europe again, eroding the EU’s competitiveness, including in the industries crucial for the energy transition, such as the metals sector.

By Tsvetana Paraskova for Oilprice.com

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