After the massive economic slump during the coronavirus crisis, large industrial sectors in particular are looking to 2021 with more confidence. According to a survey by the German Economic Institute (IW), 26 out of 43 sectors expect economic activity to be higher than in 2020.

However, a boom is not in sight. The hopeful outlook for 2021 does not yet mean a return to pre-crisis levels for a number of companies and entire sectors, explained the employer-oriented institute. This also has consequences for the labor market.

Hopes are pinned above all on the manufacturing sector. "Industry is the driving force behind the economic crisis," IW Director Michael Hüther told the German Press Agency. "However, the prerequisite is that borders remain open, supply chains do not break and children can go to nurseries and schools so that employees can continue to work."

Prof. Dr. Michael Hüther is Director and Member of the Executive Board of the German Economic Institute.

© IW

The first hard shutdown in spring also had a massive impact on industry, as many countries temporarily closed their borders. Incoming orders and production have been picking up again for some time now.

In the coming year, 21 sectors are expecting slightly higher production. Mechanical engineering, the electrical industry and the chemical industry, for example, are hoping to put the crisis year behind them. According to the IW, however, it will take some time to return to normal. The hospitality, retail, trade fair and advertising industries are hoping for at least moderate growth after the crisis year of 2020, which saw business come to a complete standstill in some cases.

The automotive industry and key supplier sectors such as foundries and steel and metal processing are expecting significantly higher production. "The brutal slump in 2020 nevertheless puts these positive expectations into perspective," explained the IW. A total of five associations expect output to be significantly higher than in 2020.

In contrast, 13 trade associations expect production levels in 2021 to be even lower than in the crisis year. The textile and fashion industry and the food industry, among others, fear a significant decline. The construction industry, among others, is expecting a slightly lower rate. Construction has been booming so far. However, according to the IW, it is increasingly suffering from the general weakness in investment and production restrictions as a result of the pandemic.

The survey was conducted in November, before the stricter measures to contain the pandemic in Germany came into force on December 16. According to Hüther, a further survey in mid-December revealed a split between large parts of industry on the one hand and the retail, hotel and catering sectors on the other, which are particularly affected by the second hard shutdown.

According to the major trade associations, a recovery in the German labor market is a long time coming. As a result, 23 sectors are expecting employee numbers to fall. These include the automotive industry and the financial sector, which had already felt the effects of structural change before the crisis due to digitalization, among other things.

Only five sectors are expecting a higher number of employees in the coming year. These include the construction industry and the skilled trades, both of which have been complaining about labor shortages for years. 14 sectors want to keep the number of employees constant. The higher short-time working allowance, which has been extended until the end of 2021, will also help.

Even if the recovery is likely to be delayed due to the renewed shutdown in Germany and other countries, the German economy is generally expected to grow again in 2021. According to Hüther, the first quarter will be difficult. "But I see no reason for deep pessimism. The German economy also recovered after the global financial crisis of 2008/2009. This was followed by a stable decade."