Since the Industrial Revolution about 200 years ago, the Germans have been an international manufacturing powerhouse. They have it all covered from cars to pharmaceuticals; the manufacturing industry here has always been on top. Like most of the global economy, Germany suffered a drop after 2008 and has been steadily recovering since. Of course, their bounce back has been paved with many obstacles but none larger than the ones they have today.
In general, Germany’s economy has seen a slow and delicate shift. Its workers have increasingly transitioned from manufacturing jobs to the services industry. This shift is marked by the incoming new generations and their labor market decisions. Recent studies suggest that manufacturing has a slow and steady decline in Germany, but it is not as devastating as the American offshoring wave.
These shifts in the German economy may have led up to the 3% drop in PMI reported in January. This comes after a nearly 6 year rise in PMI indicators for Germany, and is somewhat alarming for the manufacturing industry. While most senior economists aren’t at all too concerned with the fall of the PMI, there might be some up and coming changes that could affect the manufacturing industry in general. Most of this change in PMI is attributed to the fact that unemployment in Germany also grew. But, it appears there might be bigger fish to fry for the German manufacturing industry.
The biggest challenge coming to the German manufacturing industry is led by political initiatives. Under the new administration, American economic protectionism is starting to look like the ruling ideology. The US administration does not show a promising picture of future economic trade with Germany. And this of course could damage the German manufacturing industry. BMW, who has their biggest manufacturing plant located in South Carolina, held meetings and tried to lobby the administration into seeing the benefits of open-trade with Germany. Americans have been buying German products for decades, and any loss of the 115 billion dollars a year profits that German companies make from Americans could be devastating to their manufacturing industry.
These challenges are compounded with the shifting of the European economic market, the failures of the European Union to uphold political stability, and the coming Brexit. German economic markets will have to adapt their policies, and hope that the promises of protectionism from the current administration don’t come to light.
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