Myth of German de-industrialisation: it didn’t happen

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Renewables International

The new amendments to Germany’s Renewable Energy Act are expected to become law in August, and one main goal is to prevent one of the most severe – and non-existent – effects of the Energiewende: industry being scared out of the country. New figures from Deutsche Bank show how much German industry is suffering.

As everyone knows, one main goal of Germany’s energy transition is to ruin the economy – at least, that’s the impression I get reading international reports. But judging from the latest data published by Deutsche Bank (PDF), the Energiewende is failing to drive business out of the country.

“Capacity utilization is high at present,” the analysts write, adding that “manufacturing output in Germany looks set to grow by four percent in real terms in the full year” of 2014. Exports to Western Europe are picking up, but Deutsche Bank says global growth is sluggish – though that is keeping inflation down at 1.1 percent in the first half of 2014, despite the “good labor market situation.”

In a comparison of countries in the euro zone, Germany has the highest GDP but nonetheless low-inflation – and the only balanced budget outside of Luxembourg (not listed). Deutsche Bank
Energy is mentioned only in the context of inflation; given the strong euro and stable oil prices, energy prices are not rising. And though the analysts do not mention it, I have discussed how wholesale power ratesare down and retail power rates are stable, with the latter potentially even decreasing this year.
Otherwise, the analysts focus more on labor, with the upcoming implementation of a minimum wage (Germany currently only has wage agreements by sector) obviously being a big factor for businesses – apparently bigger than energy.
These two charts show (right) how large industry responded quite negatively to Chancellor Merkel’s nuclear phaseout in the spring of 2011, when expectations for business plummeted. But by the end of 2012, it had become clear that the effect of the Energiewende on these businesses was primarily lower power prices, not power outages. And on the left, we see that business actually remained stable as these expectations fluctuated. Deutsche Bank
The paper is the gloomiest about the Energiewende in the following passage:

“Moreover, in light of various government decisions (such as higher pensions) or high energy prices, some companies will probably show restraint when it comes to investment in Germany. As a result, employment growth in industry also looks hardly likely…. However, one needs to bear in mind that the number of employees in German industry currently is more than 7% higher than at its low point of spring 2010, and in a longer-term comparison is high overall.”

By sector, “German industry has become more dependent on the automotive industry,” with mechanical engineering and chemicals having “a disappointing start to the year.” The only reason given for mechanical engineering was lower trade with Russia.

 Source: Renewables International. Reproduced with permission.

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