Machine exports and industrial production 2008 - 2022

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 72% of machine exports from Germany in 2022. These are the EU, the USA, China, Russia and Turkey.

May, 31st, 2023 - 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 fourteen years from 2008 to 2022.

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 fourteen years from 2008 to 2022, 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 by 111% since 2008, the US industrial production by nearly 5%

The USA is number one for machine exports from Germany outside the EU with an export share of 12.6% (2022). 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 111% since 2008 contrasts with the growth of the US industrial production by 4.7% in 2022.

Comparing the annual growth rates from 2008 to 2022, this means growing machinery exports to the USA of 5.4% per year and growing US industrial production of 0.3% per year on average.

Machinery exports to the EU in sync with EU industrial production trend

The European Union accounts with 45% (2022) 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. Finally, the export ratio of German machinery to the EU reached 50% again (2016). Brexit contributed to lowering the export share to 45%.

In 2022, machinery exports from Germany to the countries of the European Union are 12.9% above the pre-crisis level of 2008, corresponding to an annual growth rate in machinery exports of 0.8%.

In the same period, industrial production in the EU grew by 6.6% per year, which corresponds to an annual growth rate of 0.4%.

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 fourteen years from 2008 to 2022, China's industrial production grew by 202%, which is an average growth of 8.2% per year. Machine exports from Germany to China increased by 86% in the same period, i.e. by 4.5% annually.

This comparison proves that German machinery exports to China lag behind the growth of Chinese industrial products by almost 50% overall.

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. 

Renewed sankions in 2022 pushed machinery exports from Germany down to a third of the pre-crisis level of 2008, amounting to 35 index points. By contrast, the development level of Russian industrial production in 2021 is almost four times higher.

Russia's industrial output in 2021 is 33% above its pre-crisis level, which means annual growth of 2.2%. By contrast, machine exports from Germany have been 45% lower since 2008, a decline of 2.4% 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 8% 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 2.6% (2022).

Turkey's industrial output is 110% above its pre-crisis level, equivalent to growth of 5.4% per year. In the same period, machinery exports from Germany to Turkey grew by 92%, i.e. by 4.8% per year.

Essentially, industrial production in Turkey and machinery exports to Turkey developed in sync with each other.