Industrial growth fails to signal economic turnaround, experts caution

The 2.6% increase in Germany’s industrial production in January 2025 compared to the previous month has not been enough to dispel concerns about the sector’s ongoing struggles. Despite the latest figures from the Federal Statistical Office (Destatis), analysts warn that industrial output remains in crisis, with no clear signs of a sustained recovery.

Niels Jannsen, an economic analyst at the Kiel Institute for the World Economy (IfW Kiel), pointed out that the rise in January merely compensated for the decline in December. He emphasized that the industry’s overall trajectory has not yet shifted toward significantly higher production levels.

Automotive and Food Industries Show Gains

The recent increase in industrial output was primarily driven by a resurgence in the automotive sector, which grew by 6.4% month-on-month. The food industry also contributed positively, recording a 7.5% increase in production. Meanwhile, machine maintenance and assembly posted a significant 15.6% rise.

However, not all industrial segments experienced growth. The manufacture of metal products contracted by 7.7%, dragging on the overall industrial performance. Energy production also declined slightly by 0.5% compared to December, although construction activity saw a modest 0.4% increase.

Persistent Challenges and Geopolitical Risks

Despite these sectoral gains, the broader industrial outlook remains bleak. New orders have been fluctuating without a clear upward trend, indicating that production levels may stabilize but are unlikely to experience a major upturn in the near future. The overall business climate in the industrial sector continues to be weak, reflecting ongoing structural challenges and external risks.

One of the key concerns for industry experts is the uncertain geopolitical environment. The potential for increased U.S. tariffs poses a significant threat, particularly to Germany’s automotive sector. Analysts warn that higher trade barriers could further undermine industrial growth, adding pressure to an already fragile economic landscape.

While January’s production figures offer some relief from previous declines, industry analysts remain cautious. Without substantial improvements in new orders and a more favorable global economic environment, sustained recovery in Germany’s industrial sector remains uncertain.