The German chemical industry is experiencing a significant and concerning downturn, according to the latest data from the Ifo Institute, raising questions about the efficacy of government intervention and the sector’s long-term competitiveness. October saw a sharp deterioration in sentiment, with the Ifo index plummeting to -19.4 points, a substantial drop from September’s -12.0.
This decline isn’t merely a short-term fluctuation. The sector’s outlook is demonstrably bleak, as evidenced by a dramatic decrease in expectations, falling from -3.7 to -13.3 points. Current assessments of the business climate have also worsened considerably, sliding from -19.8 to -25.3 points. Industry expert Anna Wolf directly criticized the government’s relief measures, stating they are “insufficient to initiate a positive trend” within the current economic climate.
Intensified foreign competition is forcing a price deflationary spiral for many firms. The price planning indicator has swung sharply negative, registering at -10.6 points compared to a positive 0.6 in the previous month. This price pressure is compounded by a weak order backlog, with companies reporting no anticipated boosts from international markets. The assessment of order stocks has plummeted to a historic low of -68.9 points, the worst figure recorded in over three decades, highlighting a severe contraction in demand.
Capacity utilization has also suffered, currently standing at just 71%, significantly below the ten-year average of 81%. This paints a picture of underutilized infrastructure and a looming threat of further stagnation.
“The combination of a lack of competitiveness, decreasing selling prices alongside high costs and weak orders is forcing businesses to curtail investments and continue to reduce personnel” warned Wolf, underscoring the potential for long-term structural damage to a vital German industry. The situation demands a critical re-evaluation of industrial policy and a more robust strategy to bolster the chemical sector’s ability to compete in a rapidly changing global landscape, especially concerning international competition and rising production costs. The current trajectory risks undermining Germany’s industrial core.