German industry surprises with production record – car and pharmaceutical manufacturers shine!

German industry surprises with production record – car and pharmaceutical manufacturers shine!

The German economy will be unexpectedly strong in May 2025 with an increase in production of 1.2 percent compared to the previous month the FAZ reports. This positive development is particularly driven by growth in the automotive industry, which grew by 4.9 percent, as well as in the pharmaceutical industry, which grew by 10.0 percent, and energy production, which grew by 10.8 percent.

The Federal Statistical Office published this data on Monday. Economists had expected stagnation for the period after April saw a 1.6 percent decline. Nevertheless, the production rate from March to May was 1.4 percent higher overall than in the previous three months. The Federal Ministry of Economics emphasizes that industrial production has been rising continuously since the beginning of the year.

Forecasts and challenges

Despite the encouraging figures, uncertainty regarding US tariffs remains. US President Donald Trump plans to make announcements on tariff rates soon, which poses additional challenges for companies. The US remains the largest buyer of “Made in Germany” goods and experts fear that domestic demand could improve over the course of the year, supporting the economy.

Furthermore, the federal government's planned increase in public investments could have a positive effect on the economic situation. In contrast, the construction industry is showing worrying trends with a decline of 3.9 percent. Here, high material costs represent a heavy burden for companies, while interest rate cuts by the central bank have so far had no positive effect on the construction sector.

Impact of US tariffs on the automotive industry

The challenges that the tariffs bring with them particularly affect the German automotive industry. How Deloitte points this out, German automobile manufacturers must respond to rising tariffs in order to remain competitive. To achieve this, strategies such as moving production to the US could be considered. However, such measures require significant investments and efforts.

Adapting global production strategies is of central importance for German Original Equipment Manufacturers (OEMs) in these turbulent times. High product quality remains a crucial factor in being able to survive in global competition with new competitors from China. Effective ramp-up management will be essential to meet the challenges of a tariff-driven world.

Fears are growing about jobs in vehicle production if tariffs continue. However, the exact magnitude of the job cuts is difficult to estimate because it depends on automakers' beliefs about the durability of tariff developments and the extent of possible production relocation to the United States.