Machine exports and industrial production 2008 - 2020

German machine exports do not synchronize much with industrial production in export countries

Industrial production is an important indicator for machines' use. So this report examines to which extent machine exports from Germany to an export country do correspond or do not correspond to the course of industrial production there. The report considers export countries that absorbed 75% of machine exports from Germany in 2020. These are the EU, the USA, China, Russia and Turkey.

November, 3rd, 2021 - The industrial production of these export countries is compared with the development of machine exports from Germany. As a common starting point, we take 2008 as the pre-crisis year and set it to 100. This way industrial production and machine exports in the export country are visible at a glance for the eleven years from 2008 to 2019.

At first it is obvious to assume that growing industrial production is linked to a growing demand for machines. However, this assumption is subject to at least three restrictions.

High-performance machines enable a relatively higher output and thus reduce the need for more less powerful machines. The users of machines extend the new deployment of machines in favor of longer useful lives, possibly combined with partial modernizations. After all, exports of machines from Germany cannot keep pace with industrial production because competitors are preferred.

The report leaves all these influencing factors to investigations elsewhere. Instead it identifies synchronous and asynchronous developments between machine exports from Germany and the industrial production of the export countries.

The long-term time horizon of twelve years from 2008 to 2020, the standardization of the pre-crisis year 2008 as a common starting line and finally the quantification of the growth rates of machine exports and industrial production makes synchronicity and asynchronicity visible at a glance.

Machinery exports from Germany to the USA grow 57% faster than US industrial production

The USA is number one for machine exports from Germany outside the EU with an export share of 10.9% (2020). In the wake of the global economic crisis, the US lost this rank to China and has regained it since 2015.

The strong growth in machinery exports to the USA of 52% since 2008 contrasts with US industrial production in 2020 that is 2.8% below the 2008 level.

Comparing the annual growth rates from 2008 to 2020, this means growing machinery exports to the USA of 3.6% per year and a decline in US industrial production of 0.2% per year on average. 

Machinery exports from Germany to the USA exceed the development level of industrial production there by 57%.

Machinery exports to the EU 8% above the development level of EU industrial production

The European Union accounts with 49% (2020) for almost half of all machine exports from Germany. Before the global economic crisis, this share stood at 52%, then fell to 44% by 2013, while rising to the developing BRIC and MIST countries.

In 2020, machinery exports from Germany to the countries of the European Union are 1% above the pre-crisis level of 2008.

Even taking into account 2019 with the peak value of 14% above the 2008 level, machinery exports to the EU increased by only 1.2% per year. In contrast, industrial production in EU countries in 2019 is only 1.2% above pre-crisis levels after the onset of the crisis, an annual growth of 0.0% p.a. since 2008.

Looking ahead to 2020, the results look like this: Machine exports to the EU +1.7% vs. 2008, i.e. +0.1% p.a. on average, compared to industrial production in the EU in 2020 7.6% below pre-crisis levels of 2008, i.e. contracted by 0.5% p.a. on average.

The development level of German machinery exports to the EU exceeds the development level of EU industrial production by 8%.

Germany’s machine exports lagging behind China’s growth potential by 50%

After the global economic crisis, China became the largest export market for machinery from Germany outside the EU. Machine exports increased by 77% from 2008 to 2011, outpacing the growth of industrial production in China, which was 46% in 2011 compared to 2008.

Then followed a decline in German machine exports to a level of +38% by 2016 compared to 2008 but China's industrial production at that time recorded +116% compared to 2008. Thus machine exports from Germany to China lagged significantly behind the growth in Chinese industrial production.

In the last twelve years, China's industrial production has grown by 166%, which is an average growth of 8.5% per year. Machinery exports from Germany to China grew by 78% over the same period, i.e. by 4.9% per year.

This comparison shows that German machine exports to China lag behind the growth of Chinese industrial production as a whole by almost 50%.

Machine exports to Russia like a roller coaster ride

Machine exports to Russia reached the development level of Russian industrial production in 2012. The export ratio was 5.1%, its highest level to date.

The sanctions against Russia adopted in 2014 almost halved the pre-crisis level of machine exports from Germany. 

Since then, machinery exports from Germany to Russia have been 72% below the development level of Russian industrial production.

Russia's industrial output in 2020 is 19% above its pre-crisis level, which means annual growth of 1.4%. By contrast, machine exports from Germany have been 31% lower since 2008, a decline of 3% per year on average.

Have sanctions been imposed on the United States for its war against Iraq in violation of international law? Or because of their attack on Afghanistan? None of this is known. These sanctions are pure hypocrisy in their justification and serve to weaken Russia as a competitor for areas of global influence.

Machinery exports to Turkey are 17% below the development level of Turkish industrial production

The so-called MIST countries include Mexico, Indonesia, South Korea and Turkey. In this group of countries, Turkey shows the highest export share of 2.4% (2020). Since 2017 the export quota of machines from Germany to Turkey has been declining.

Turkey's industrial output is 70% above its pre-crisis level, equivalent to growth of 4.5% per year. In the same period, machinery exports from Germany to Turkey grew by 44%, i.e. by 3.1% per year, only half as much.

This means that 17% of the growth in Turkish industrial production is not reflected in growing machinery exports from Germany to Turkey.