Economy: Which sectors are losing – and which are gaining

Thursday, 14.11.2019
16:59 clock

The pessimists have been taught otherwise for the time being. For, unlike many predicted, the German economy has recently grown – albeit weakly. According to statistics, gross domestic product (GDP) grew by 0.1 percent between July and September compared to the same quarter of the previous year.


In the second quarter, GDP had shrunk by 0.2 percent. After two consecutive quarters in a row, economists speak of a recession – but it did not come that far. "We have no technical recession, but the growth figures are still too weak," said Economics Minister Peter Altmaier in the ARD.

Positive impulses came in summer mainly from consumption. "Private spending was higher than in the second quarter of 2019, and the state also increased its consumption," the statisticians said. In addition, exports increased while imports remained at about the level of the previous quarter. In addition, more was invested in buildings. By contrast, investments in equipment such as machines declined.

No reason to be all-clear

  "The German economy has once again got away with a black eye," said DekaBank economist Andreas Scheuerle. "But there are three reasons for not calming down and contentedly back: the economy suffers from an investment and reform backlog, the economy is suffering from the enormous global political uncertainty, and Germany's flagship industry – the automotive industry – is no longer running smoothly."

The current problems will keep companies in the coming year in breath. Trade conflicts, a weaker global economy and Brexit chaos are especially affecting exporters. And the anticipated job losses in key sectors could ultimately impact consumption.

  In the meantime, many industry-related service providers, such as the logistics industry, are suffering from the slack in the industry. Businesses predict Europe's largest economy to grow by 0.5 percent this year. In 2020, it should accelerate to 0.9 percent, but only because of the higher number of working days.

What is the situation and what are the prospects in each industry? Where the business is going well – and where Brexit, growing protectionism, or even the climate discussion leaves its mark, the overview shows.


Automotive: In the automotive industry, the struggle for existence has begun for manufacturers and suppliers. With mergers and, above all, cooperations, Volkswagen, Daimler and Co. are trying to prepare for a future characterized by the transition from internal combustion engines to electric drives, (partly) autonomous driving and digitization. The impending punitive tariffs for exports to the US do not make matters easier. 2020 could be a fateful year for the German carmaker. mik

Mechanical engineering: Even the numbers in August were devastating for the mechanical engineers. But then the number of orders in September collapsed again massively – in real four percent. Real demand comes really only from the euro partner countries. The braking effect of trade conflicts and the uncertainties surrounding the Brexit, however, destroy such bright spots. Added to this is the structural change in the auto industry. Overall, there is no reason for the all-clear, says the chief economist of the industry association VDMA, Ralph Wiechers. The industry expects a real decline in production of two percent this year. Last year, the German key industry, with well over one million employees, had achieved a plus of more than two percent. mik

Real estate: It is a small detail in the real estate statistics from which some consumers currently draw hope. Thereafter, the prices for apartments and houses have recently increased only slightly. The problem: These are just luxury stamps whose value depends on completely different factors anyway. For the normal situations in the big cities applies: The lack and the low interest provide massive price pressure. The new building solves the problem at best in the long run: This is due to long approval procedures and regulations that make the construction extremely expensive. As cynical as that sounds, it's not bad news for the industry itself. mik

Chemistry / Pharma: People with November blues should not read the latest industry report of the German Chemical Industry Association. "No turnaround in the chemical business" is the title of the VCI's work. It states: "The downturn in the chemical and pharmaceutical industry continued in the third quarter of 2019." Incidentally, positive signals are also not expected.
Business in the core market of Europe and Asia is particularly bad, complains the association. After all, the automotive industry and other chemical-intensive sectors performed poorly. "Overall, sales in the chemicals and pharmaceuticals industry fell by a good eight percent year-on-year in the first nine months. According to its own statements, BASF is feeling the US trade war against China and the impending Brexit. At Bayer, tens of thousands of lawsuits are piling up against the subsidiary Monsanto for the herbicide glyphosate. The daily business is running quite well. clh

Air traffic: The daily crowds at Germany's major airports hide every sign of crisis. And even the first glance at the statistics does not indicate a downturn. But in September, the number of travelers and flight movements fell noticeably after three quarters of growth. And the freight business has been declining almost all year long. "The crisis is here," claims the responsible association ADV. However, this statement could also have a political background. After all, the industry is currently trying with all its might to prevent the increase in air traffic tax announced by the German government.
Market leader Lufthansa is certainly not in a bad way: Although the consolidated profit in the first three quarters compared to the previous year fell slightly; but that is mainly due to higher costs. Holiday Flyer Condor fights against problems of his insolvent owner Thomas Cook. In the low-cost airlines, the picture is inconsistent: Ryanair cuts Germany connections, Easyjet expands them. clh

Financial sector: low interest rates, income collapses, regulatory costs: this fatal triad has been determining the German financial sector for years, and that will not change much in 2020 either. On the contrary, the pressure on savings banks and cooperative banks to cut costs through mergers and branch closures will increase as long as interest rates remain as low as they are now likely to be. And the private institutions like Deutsche Bank and Commerzbank? Save for years against the cost pressure and also suffer from the fact that the international competition pulls away. Conceivable, then, that comes back on the agenda, what failed in 2019: Talks of the two largest German banks on a merger. For as long as the banking union in Europe is not completed, cross-border mergers of private banks are hardly conceivable. Another possibility: The infirmity of both houses is extended. What will not happen: that the problems evaporate. baz

Food: The scandal of germinated sausage of the Hessian manufacturer Wilke with several deaths has alarmed the public. Nevertheless, Germany's fourth-largest industry is doing well overall. In the first eight months of this year, industry sales grew by 1.7 percent. Obviously, despite the slowing economy, the Germans have not yet begun to save on food and drink. On the contrary: as the Federal Association of the Food Industry writes, consumers increasingly choose "higher quality products with a special added value" when buying groceries. The trend should certainly not hurt margins. clh

Trade: Consumers are still not spoiling the buying mood of the bad news of the economic experts. According to a study by the consulting firm EY they will spend almost as much money on Christmas gifts as last year. The retailers, however, have only limited reason to derive special hopes. Many of them will have to be losers. Because the trade is increasingly concentrated on the few major shopping streets and the Internet, and there dominate the big ones.

In contrast, the market share of retailers with individual transactions has almost halved since 2000 from 31.9 percent to 16.2 percent, as figures from the Hauptverband des Deutschen Einzelhandels confirm. On the other hand, discounters, retail chains and online retailers have significantly increased. "Consumers' expectations have changed a lot," said Boris Hedde, Managing Director of the retail researcher IFH Cologne opposite the "Handelsblatt". "Customers are getting more demanding and comfortable." They expected free service, a wide selection, low prices and adventure shopping. mik

Energy: In the coming year, important decisions will be made in the energy sector. The exit of the coal is expected to start, at the same time suffers the wind industry industry arguably the biggest crisis in its history. Extensive bureaucracy and complaining rotor antagonists have dropped the expansion of wind farms to the lowest level in this century, former industry figures are struggling with bankruptcy, thousands of jobs are canceled. And now the government also wants to increase the minimum distance of the turbine towers to housing estates. In extreme cases, they are even 1000 meters away from land on which approved houses, but not yet built. The protest against this clause is great. But even if the government were to back down, the fight for survival in the German wind power industry is likely to remain the biggest topic in the energy sector by 2020. ssu

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