Factory output in June reaches five-year low - Production in industries sank to a five-year low in June
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Germany's industrial production experienced a strong growth in May 2025, with a 3.3% month-on-month surge, surpassing expectations. However, this growth was short-lived as a sharp decline of 1.9% in June 2025 brought output back to pandemic-level lows[1][3][4].
Sector Performance
Machine-Building Industry
The machine tool and precision tool sector faced declining demand, with orders falling 10% in Q1 2025 versus the prior year. Domestic orders dropped by 30%, while foreign demand remained stable after a previous drop. Trade policy uncertainty, global market weakness, and reduced export orders particularly affected the sector[2]. However, many machine-building companies are investing heavily in digitalization and Industry 4.0 technologies to enhance resilience and competitiveness.
Pharmaceutical Industry
Specific recent data on the pharmaceutical sector's production is not detailed, but the industry tends to be less volatile and more resilient due to steady demand and regulatory dynamics. Global supply chain disruptions and raw material availability could influence output[1].
Manufacturing Sector (Broadly)
Manufacturing showed resilience in May with improvements across capital goods, intermediate goods, and consumer goods production. However, in June, a broad sector-wide weakness was recorded, with consumer goods output falling 5.6%, capital goods declining 3.2%, and intermediate goods showing negative trends[4]. The automotive industry, a key pillar, contributed to the May upswing but possibly faced deteriorating conditions in June.
Recent Sector Performance
| Sector | May 2025 | June 2025 | Key Influencing Factors | |--------------------|-------------------------------------|-----------------------------------|----------------------------------------------------------| | Machine-Building | Stable to slight growth in exports | Declining orders especially domestic | Trade uncertainty, policy disruptions, stimulus hopeful | | Pharmaceutical | Not explicitly reported | Not explicitly reported | Typically resilient but sensitive to global supply chains| | Manufacturing | Broad-based growth (capital, consumer, intermediate goods) | Broad decline—consumer goods -5.6%, capital goods -3.2% | Weak global demand, inflation, energy costs, global competition|
Overall Context
The mixed industrial performance highlights both the strength and vulnerabilities in Germany’s industrial landscape in 2025 amid a challenging global economic environment[1][2][3][4]. The May surge indicated short-term resilience, but June’s steep decline reveals underlying fragility. The machine-building industry struggles with order declines and uncertainty but maintains substantial investment in digital transformation. Manufacturing remains critical but highly sensitive to global demand trends and trade policy uncertainties. The pharmaceutical sector details are insufficiently covered but generally expected to have steadier demand fundamentals absent additional shocks.
The decline in production in June was attributed to the Federal Ministry of Economics, which cited "counter-movement to the pull-ahead effects" of the announced US tariff increases as a partial cause. The preliminary figures for May's production increase of 1.2% is no longer accurate. The food industry also experienced a 6.3% decrease in production in June, and the pharmaceutical industry showed a decline of 11.0% in production. The US tariff announcements by President Donald Trump caused companies to bring forward orders to fill their inventories at the beginning of the year. Currently, there are no signs of impulses for a sustained upturn in industrial growth in Germany, due to deteriorating conditions caused by tariffs and dampened demand from countries outside the Eurozone.
Jupp Zenzen, the economic expert of the German Industry and Trade Chamber (DIHK), assessed the situation as pessimistic, stating that the downward trend is unbroken and there is no reason to hope that the industry will soon emerge from the recession after two years. Bureaucracy, high location costs, and lengthy approvals were identified as "growth brakes" in the German manufacturing industry.
[1] German Federal Statistical Office (Destatis) [2] VDMA (Verband Deutscher Maschinen- und Anlagenbau) [3] Federal Ministry of Economics and Energy (BMWi) [4] Ifo Institute for Economic Research
- The decline in German industrial production, as seen in June 2025, could potentially impact the employment situation across various EC countries, especially those with significant trade relations with Germany, due to the broad sector-wide weakness and unfavorable economic conditions.
- In response to the challenging economic environment and the declining demand in sectors like machine-building, some German companies are turning to technology and digitalization, such as Industry 4.0 technologies, as a means of enhancing resilience and competitiveness, which could have potential long-term implications on the employment policy in these industries.
