Germany’s processing industry offers more services and produces less, a study by the Ifo Institute published on Friday reveals.
Numbers on classical industrial production do not fully reflect the economic performance of the processing industry, said Ifo Chief Economist Timo Wollmershäuser. “While the production index has decreased by 13 percent between 2018 and 2024, the overall value added in the same period has only decreased by three percent.”
Industrial companies are increasingly focusing on hybrid products, combining goods with product-related services. At the same time, many companies are relocating parts of their physical production to foreign countries and concentrating on product development and sales in Germany.
The strategic shift leads to an adjustment of production capacities and increasing revenues from non-industrial activities. “The sole consideration of goods production in Germany is too short-sighted. The industry is adapting its business models and concentrating its in-country activity increasingly on research and service offerings” Wollmershäuser said.
This development is particularly evident in the automotive and machinery industry. There, research and development, as well as product-related services, are gaining importance, while traditional production capacities are increasingly being outsourced. This structural change should be taken into account when assessing the current situation of the German industry, the institute said.