This paper studies the trends of the German manufacturing sector in recent years, highlighting the factors that have weighed more heavily there than in the rest of the euro area. An econometric analysis allows the authors to assess the spillovers from the German industry to the manufacturing sectors of other major economies in the area.
Higher gas prices penalized German energy-intensive firms more than those of other countries, owing to the greater reliance on gas of the German chemical sector. The impact of weak global demand was stronger in Germany due to its higher trade openness. The automotive industry, which has been declining since 2018, accounts for a larger share of the manufacturing sector in Germany than in the euro area. Shocks to the German industry exert a significant influence on the manufacturing sector of the other main euro-area economies, especially Italy.
