Germany's hard-hit auto sector

The core pillar of Germany's export economy is being shaken: the nation's automakers face pressures ranging from increased EV competition in China to Donald Trump's tariffs on the once-lucrative US market. Expensive energy inputs haven't helped. One of the most striking headlines recently came from Bosch, the nation's biggest auto-parts manufacturer; it's cutting 13,000 jobs.

As our first chart shows, German industrial output plunged by 4.3% month-on-month in August, the biggest decline in more than three years. The downturn was led by a dramatic 18.5% collapse in automotive manufacturing. Machinery and equipment production also contracted. Our second chart focuses on auto production and exports; both metrics also experienced a sharp year-on-year decline in August.

CEIC's alternative datasets, high-frequency indicators and nowcasts suggest that the weakness persisted into September.

The Truck Toll Mileage Index, which tracks freight movement by heavy goods vehicles on German highways, continued to slow; this points to ongoing strain across supply chains and industrial transport activity.

Our proprietary nowcast model indicates that any meaningful growth rebound for the economy as a whole in the third quarter is increasingly unlikely. Official GDP figures for Q3 are due for release on October 30.

Forward-looking business surveys also paint a gloomy picture. Hamburg Commercial Bank's Manufacturing PMI remained just below the 50-point threshold that separates expansion from contraction; meanwhile, the closely watched Ifo Business Climate Index declined in September, reflecting rising pessimism among German firms regarding their future output and demand.

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