Signal EU industrial output and investment weakened during the energy price shock

Summary

Eurostat data show total EU industrial production contracting by 1.5 percent in 2023 and 2.4 percent in 2024, with sizeable declines in electrical equipment and motor vehicle manufacturing. In Germany industrial output fell 4.5 percent in 2024, and production in energy-intensive industries dropped 5.7 percent in 2022 and 11.2 percent in 2023 before a slight recovery that left it at a low level. Germany's statistical office links the 2023 fall in energy-intensive output to the sharp rise in energy prices. About 60 percent of European firms named energy prices as a major investment obstacle in 2023, more than 20 percentage points above the share among US firms, and the Commission warns that a widening price gap could push new investment and existing plants out of Europe. The report cautions that weaker demand, high interest rates, Chinese competition and sector-specific factors also contributed, so the downturn cannot be attributed to energy prices alone.