Berlin economy revving up a recovery

Sales climb in June in manufacturing while experts forecast a return to normalcy in 2021. Pharmaceutical sales down, however.

It should be: Berlin Motorcycle Works, AMIRITE? 
It should be: Berlin Motorcycle Works, AMIRITE?

Berlin-Berlin’s local economy appears to be on the mend after sales at the 338 Berlin industrial companies with more than 50 employees rose 1.5 per cent in June over the same month a year earlier to €2.17bln, following a 20.5 per cent decline in year-on-year drop in May.

Food and animal feed companies saw sales in the month blossom 40.9 per cent as they caught up with pent-up demand while sales at engineering and factories saw rose 2.5 percent. Pharmaceutical companies – Berlin's biggest manufacturing sector – posted a 4.7 per cent decline in sales.

"Berlin's industry is reporting back," said Claus Pretzell, and economist at the Investitionsbank Berlin. Although sales in the entire second quarter were still 7.1 per cent below those of the same quarter last year, he downplayed the drop.

"We already had a similar decline at the end of 2017," he said.

The corona lockdown shrunk Berlin’s gross domestic product 12 per cent in the second quarter, ahead of the 11.7 per cent decline in Germany overall.

The domestic market primarily drove the June recovery with consumers buying food and companies themselves taking the time during the lockdown to upgrade and repair equipment.

At the BMW motorcycle plant near Spandau, halted closed production for six weeks and hired Adlershof-based Ahlberg Engineering for maintenance work. BMW resumed production in early May.

Production is near pre-crisis levels, BMW said, in part because the motorcycle market is recovering much faster than the market for new cars. In June, motorcycle sales in Germany were more than 48 per cent higher than in the same month last year and in July 54 per cent higher.

Sales also increased in Italy, France, Spain and Great Britain. In fact, BMW was able to sell more motorcycles worldwide in July this year than in any previous month.

However, international sales – where Berlin’s manufacturers get 60 per cent of their income –remained weak in June, falling just 1.3 per cent, compared to 23 per cent in May. In the first half, Berlin's international sales among major industrial companies fell 5.3 per cent over the first six months of 2019.

The recovery is also supported by new orders, which fell 33 per cent year-on-year in May, but rose 6.2 per cent in June, again buoyed by domestic demand and leading to a 24.6 per cent bump over June of 2019.

Still, demand from abroad remained weak with international new orders 5.6 per cent lowe.r.

"Foreign business is also slowly picking up again," the IBB’s Pretzell said, adding that it would take longer to recover.

Still, managers shouldn’t get their hopes too high – the IBB expects figures to remain below last year’s for the next three quarters with growth of as much as 9 per cent returning in the second quarter of 2021.

"At the end of next year we will once again have above-average growth,” Pretzell said.