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Economics Update January 2024 - Industry outlook 2024: German economy stuck in the doldrums

Bad Homburg, 1/8/2024
by Axel D. Angermann
  • Industry: Downward trend continues
  • Construction: Another significant drop in turnover despite good situation in civil engineering
  • Retail: Stabilization due to falling inflation
  • Digital economy: Strong growth and good prospects

The continuing weakness of the German economy is reflected in cautious forecasts for many economic sectors and industries for 2024. A weak global economy, rising interest rates and increasingly visible locational disadvantages mean that the German economy will continue to tread water in the coming year.

Industry with another real drop in turnover

Industry has been on a downward trend since 2018. Production figures are currently still around 6% below the 2019 level, although there is hope that an improved global economic environment will allow industrial production to grow again in the second half of the year. Overall, however, production in 2024 is likely to be around 2% below the level of 2023. The chemical industry will be able to stabilize at a low level after the drastic decline of recent years. The automotive industry must expect significant headwinds: The discontinuation of government subsidies for the purchase of electric vehicles and strong international competition with growing market shares for Chinese manufacturers mean that production is expected to be around 3.6% lower than in 2023. The outlook for the mechanical engineering sector, which is suffering from the general weakness in investment, is also negative. More stable expectations regarding the framework conditions with which companies can plan in the medium term would be a key factor for an improvement in prospects here, but from today's perspective this is more of a wish than an observable reality.

Poor prospects for the construction industry

When the traffic light government took office two years ago, it promised to create 400,000 new residential units per year. This target is now a long way off. In fact, construction output has shrunk by 4 and 3.5 percent respectively in the past two years, and there is still no end in sight to the downturn. This applies in particular to property developers and project developers, whose business is suffering massively from higher interest rates and high construction costs. The simplification of building regulations, a comprehensive reduction in bureaucracy and the massive promotion of serial construction could provide a remedy here. The fact that the overall decline in the construction industry is not even higher is due to a good order situation for projects within the existing building stock and the positive development of civil engineering. However, the long-term prospects here depend largely on the reliable financing of road and rail construction projects.

Signs of hope for consumption

Falling inflation is combined with the expectation of moderate growth in private consumption in 2024. Against this backdrop, retail sales should at least stabilize after the significant decline in 2023. Travel agencies and tour operators saw strong growth in 2023 and should also perform well in 2024. Even after the tourism industry achieved a price-adjusted sales increase of 14% in 2023, sales are still more than 10% below the 2019 level. Further catch-up effects are therefore possible, even if the pace of growth should slow noticeably. In contrast, a decline in sales is expected in the hospitality industry, as the abolition of VAT relief will lead to higher prices and falling demand.

Digital economy decouples from general economic weakness

The sales trend in the IT sector and related industries remains positive: Turnover from information technology services is now a third higher than before the pandemic, while the increase for data processing and web portals is 19%. Both sectors are also likely to benefit from the ongoing pent-up demand for digitalization in 2024. However, what was said last year still applies: in order to fully exploit the potential of these sectors, more impetus is also needed from the political sphere. More commitment from municipalities and federal states in the digitalization of administrative processes and citizen services would be helpful here.

Table: Growth in Germany by sector
















About Axel D. Angermann

As Chief Economist of the FERI Group, Axel D. Angermann analyzes the economic, monetary policy and structural developments of all markets that are important for asset allocation. His analyses form the basis for the strategic orientation of FERI's multi-asset strategy, for which the CIO of the FERI Group, Dr. Marcel V. Lähn, is responsible. Angermann himself has been responsible for FERI's analyses and forecasts for the overall economy and the international financial markets since 2008. He joined the company in 2002 as a macro analyst. His professional career began at the Max Planck Institute for Economics and the German Chemical Industry Association. Angermann studied economics in Berlin and Bayreuth.

About FERI

The FERI Group, headquartered in Bad Homburg, Germany, was founded in 1987 and has developed into one of the leading multi-asset investment houses in the German-speaking region. FERI offers tailor-made solutions for institutional investors, family assets and foundations in the business areas:

Founded in 2016, the FERI Cognitive Finance Institute acts as a strategic research center and creative think tank within the FERI Group, with a clear focus on innovative analyses and method development for long-term aspects of economic and capital market research.

Together with MLP, FERI currently manages assets of approximately €56 billion, including around €18 billion in alternative investments. In addition to its headquarters in Bad Homburg, the FERI Group has offices in Düsseldorf, Hamburg, Munich, Luxembourg, Vienna and Zurich.


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Marcel Renné

Chairman of the Board

Rathausplatz 8-10

D-61348 Bad Homburg

Axel Angermann