Ifo Institute reports decline in German industrial workforce and output

A report by the Ifo Institute indicates that the German industrial sector experienced a significant contraction by the end of 2025. Specifically, the number of employees in German industries fell by approximately 496,000 since 2019, representing a 7.1 percent decline. Furthermore, industrial production output dropped by 13 percent between 2018 and 2024, with projections suggesting this downward trend will persist.

The decline, often characterized as a process of gradual deindustrialization, is attributed to a combination of long-term economic factors. The report traces the origin of this downturn to the economic crisis following 2010, which initially stifled consumer spending and subsequently suppressed capital investment. These structural challenges have been exacerbated by intensifying competition from Chinese manufacturers and the European Union’s relative lag in the artificial intelligence sector.

Energy costs remain a critical burden for German firms, with industrial energy prices currently averaging about 23 percent higher than the European Union norm. This trend precedes the energy crises triggered by the Russian invasion of Ukraine and the subsequent conflict involving the United States, Israel, and Iran, highlighting the deep-rooted nature of the industrial retreat.