Bavarian Metal and Electrical Industry (M+E) Economic Report 01/2025

Bavarian M+E industry remains in recession

Weak overall economic demand, a general lack of investment, high energy and interest costs, geopolitical tensions and unclear political conditions at federal level: the Bavarian M+E industry is groaning under a multitude of burdens. Production and capacity utilization continue to decline. As a result, more and more companies are either having to put employees on short-time work, lay off workers or even close down completely.

Further downward trend expected

There is also no improvement in sight, as incoming orders in the Bavarian M+E industry continue to be weak. Although they rose by 1.8 percent in the fourth quarter of 2024 compared to the same quarter in the previous year, however, incoming orders were a good ten percent lower. The downward trend in production and incoming orders is also reflected in capacity utilization which has been falling continuously for over two years. In January 2025, the capacity utilization rate was just 75,6 percent, well below the normal level of 85 percent. Apart from the COVID-19 pandemic slump, this is the lowest level in 15 years.

Employment continues to decline

The labor market has not been spared from the weak economic development. In the fourth quarter of 2024, the number of employees in M+E companies fell for the fourth time in a row compared to the previous quarter. In total, around 10,000 jobs were lost in Bavaria’s M+E companies between January and December 2024. At the end of 2024, the number of employees was 864,200. The general downward trend is likely to continue. The employment plans of Bavarian M+E companies have remained consistently negative for over a year.

Lack of orders remain a major burden

Sentiment among Bavarian M+E companies remained poor in the fourth quarter of 2024. In December, the ifo business climate index for the Bavarian M+E industry stood at -43.5 percentage points, 25 percentage points lower than at the start of the year (-18.5 percentage points). Although the index rose in January 2025, sentiment remains very poor at -40.2 percentage points. The negative feedback clearly outweighs the positive feedback. The most important reason for the critical economic situation and companies’ pessimism is the weak order situation. In January, 2025 more than half (58.4 percent) of M+E companies cited a lack of orders as an obstacle to production for the third quarter in a row.

Detailed information on the economic situation of the Bavarian M+E industry can be found in the current issue of the M+E Economic Report (in German).