German businesses yet to secure adequate contracts exceed one-third
In July 2021, over a third (36.7%) of German companies are still struggling with insufficient orders, according to a report by the Ifo Institute, a research organization based in Munich. The order situation in various sectors, including industry, automotive, mechanical engineering, electrical equipment manufacturing, and the metal industry, remains a cause for concern.
The persisting order shortage is a major obstacle to a substantial economic recovery, as commented by Klaus Wohlrabe, an expert at the Ifo Institute. The high order shortages in industries like automotive, mechanical engineering, and electrical equipment manufacturing are driven by a complex mix of structural challenges, shifting global trade dynamics, and labor market mismatches.
One key challenge is the paradoxical shortage of skilled workers in manufacturing sectors, despite high overall unemployment rates. This is caused by an aging workforce, rigid labor market regulations, and a gap between available skills and industry demands, leading to difficulties in filling specialized roles despite contraction in manufacturing employment.
Global competition, especially from China in sectors like electric vehicle manufacturing, is disrupting Germany’s traditional export dominance in automotive. U.S.-EU trade tensions and tariffs have led to reduced German car exports and increased economic risks, causing production cuts and job losses.
Elevated energy prices, particularly in energy-intensive industries like chemicals and steel, add costs and limit manufacturing growth. The transformation toward electromobility demands new supply chains, increasing logistics space needs despite overall economic stagnation or slight contraction. This mismatch between demand for logistics infrastructure and economic performance adds to operational bottlenecks.
Investment uncertainty and the growing emphasis on automation and robotics to compensate for labor scarcity pose further challenges. Germany ranks high in robot density, indicating adoption of advanced manufacturing technologies, but recent market declines and increasing global competition, notably from China, add to these challenges.
The metal industry is particularly affected, with almost half of the companies now reporting an inadequate order situation. The automotive industry has experienced a significant rise in companies without orders, from around 35% to just under 43%. Mechanical engineering now shows a share of companies without orders at 46%, while electrical equipment manufacturers have a reported share of companies without orders at 41%.
These interrelated issues contribute to the high order shortages as companies struggle with constrained labor supply, external trade disruptions, rising costs, and logistical bottlenecks, impairing their ability to fulfill orders and invest in capacity efficiently. This figure remains significantly above the long-term average, indicating that the order shortage in large parts of the German economy continues to be a concern.
The community and various businesses are discussing potential solutions to address the persistent order shortages, as highlighted by the Ifo Institute's report. These discussions revolve around employment policies, as the paradoxical shortage of skilled workers in manufacturing sectors, despite high overall unemployment rates, is a key issue. Additionally, the finance sector plays a crucial role in addressing the challenges faced by German companies, as it influences the availability of funds for investment in new supply chains, automation, and logistics infrastructure to overcome operational bottlenecks.
