High energy costs are hitting and crushing Germany’s manufacturing industries.
- Germany’s industrial sector is suffering under the weight of the energy crisis.
- Production dropped 0.8% from July to August—a further decrease since the war began in Ukraine. Total manufacturing is down 2.9% since February.
- Skyrocketing energy prices are lowering profitability and lowering output in industries with high-energy usage.
- “German factory output fell in August, driven by cutbacks in energy-intensive industries as costs surged following reductions in the supply of natural gas from Russia,” says The Wall Street Journal.
- “With separate figures showing a sharp drop in new orders during the month, and retail sales also falling, the outlook is for further declines in one of the world’s industrial powerhouses as the global economic damage caused by the Kremlin’s decision to invade Ukraine continues to mount.”
Why it’s important
As we previously reported, the German economy is suffering from profitability issues due to the war. Nearly 16,000 businesses may be forced to close due to low or negative profit margins.
That economic stress is harming manufacturing too.
“So far this year, businesses have borne the brunt of energy price rises in Germany and are responsible for most of the savings in gas consumption, with household usage up from last year in recent weeks,” says The Wall Street Journal.
Backing up a bit
Germany has faced serious negative side effects of the ongoing energy crisis. Following the closure of the Nord Stream pipeline, the country has been forced to nationalize 40% of its energy supplies to ensure it will continue to have power through the winter.
The threat of energy shortages, rationing, and blackouts appears to be lowering but skyrocketing prices look to continue crushing the European economy for the foreseeable future.
“With gas stores in Germany now more than 92% full according to this week’s government figures, few experts expect the country to run out of gas this winter barring a prolonged cold spell, but high prices are likely to endure and supplies for next winter aren’t guaranteed,” says The Wall Street Journal.