European industry is losing momentum

After a moderate decline in 2023 (-1.4%), industrial production in the EU is again negative in 2024, falling by a further 2% in real terms. This is a worrying sign, especially against the background of previous growth: in 2021 volumes jumped by 8.5% after the pandemic collapse, and in 2022 by a modest 0.3%.

In nominal prices, the drop is also significant: from €5.975 trillion in 2023 to €5.86 trillion in 2024. Particularly noteworthy is the fact that among the top 10 manufacturing sectors, only pharmaceuticals grew (+12.7%, to €263bn). In comparison, the output of electrical appliances fell by 8.6 per cent, vehicles by 6.4 per cent, mechanical engineering by 4.7 per cent, and metallurgy and metal processing by 4.3 per cent.

This decline can be explained by several factors at once. Firstly, weakening demand for manufactured goods in the EU and beyond, including due to geopolitical instability and supply chain disruptions. Second, the transition to a greener economy takes time and requires serious investment, especially in energy-intensive sectors such as metals and chemicals. Inflationary pressures and rising interest rates also continue to deter investment in modernisation.

Yet, as Eurostat notes, the pattern of decline is uneven. Food, beverages and tobacco grew by 1.8 per cent (to €1.081 trillion), while chemicals grew by 1.5 per cent (to €462 billion). This shows that consumer demand in these sectors remains resilient even in the face of turbulence.

Against the backdrop of the downturn in heavy industry, the pharmaceuticals sector looks almost like a flagship for sustained growth: €263bn compared to €234bn a year earlier. This is largely due to the ongoing effects of the pandemic, an ageing population and sustained investment in medical technology.

In historical perspective, the EU industry is not experiencing its first turbulent phase. However, a two-year decline in production is an atypical and worrying phenomenon. Experts warn: if the trend continues into 2025, it could have a negative impact on employment and investment activity in key European regions.