Germany's long-term growth hit by industrial weakness: ifo

BERLIN, Oct. 2 (Xinhua) -- Weakness in Germany's industrial base has been a key driver of the country's long-term economic slowdown, with growth halving over the past five decades and fresh signs pointing to further strain ahead, according to a report published Thursday by the ifo Institute, a leading economic research think tank.

The study found that German economic output expanded by nearly 3 percent annually in the 1970s, but in the years leading up to the coronavirus pandemic, average annual growth had slowed to around 1.5 percent. Roughly half of that decline was linked to weaker performance in core industrial sectors.

"The automotive industry, mechanical engineering and industry-related services such as leasing or management consulting have been mainly responsible for the slowdown in momentum," said ifo researcher Robert Lehmann.

The report also stressed the strong spillover effects between sectors, noting that weaknesses among suppliers spread quickly across the wider economy. Ifo researcher Lara Zarges pointed to construction as an example: "Although its share of the economy is small, it has significantly contributed to the slowdown since reunification, as many other sectors depend on its performance."

Official data show the number of unemployed in Germany has climbed above 3 million for the first time in a decade. A separate report by consultancy EY found the industrial sector shed more than 114,000 jobs over the past year, including some 51,000 in the auto industry.

Ifo warned that growth is likely to weaken further, potentially grinding close to a standstill. A shrinking workforce due to demographic pressures will deepen labor shortages across the economy, the researchers cautioned.

Germany's economy shrank by 0.3 percent in the second quarter this year compared with the first three months of the year. It was the only G7 member that failed to post growth in the past two years. The Association of German Chambers of Industry and Commerce (DIHK) has warned that ongoing industrial weakness could put the country on track for a third straight year of recession, something not seen in post-war German history. Enditem