German mechanical engineering activity seen falling in 2020

Germany’s export-intensive mechanical engineering industry continues to suffer from the growing protectionism around the globe, says industry association VDMA in a statement on sentiment this week.

“A sustainable change for the better is not foreseeable in the near future. We therefore expect a real decline in production of -2% in mechanical engineering in 2020,” says VDMA’s chief economist Ralph Wiechers. VDMA also confirms its production forecast for the current year which is also down -2% on the previous year.

The downturn for VDMA’s member companies is being cushioned by a good order loading of 8.4 months at the end of July 2019, Kallanish learns from the association.  A capacity utilisation of 86.6% has been maintained to date, just above the long-term average.

But real production has shown an increasingly negative trend in the course of the year so far. In the first seven months it fell by -0.9% compared with the previous year. While the first quarter of 2019 showed growth of 0.3%, production in Q2 2019 declined by -2.9% compared to the previous year.

The trade war with the USA has put a brake on China’s activity, and the prospects for machine deliveries to the EU, the largest sales market, are also mixed. Many countries are victims of the trade dispute between the USA and China because of their close trade relations. Added to this is the continuing uncertainty as to when and how Britain’s EU withdrawal will take place. Customers of machines and systems are therefore reluctant to invest.

However, Wiechers suggest that there is light at the end of the tunnel. “Global industrial growth is now at a level that, unless there are massive disruptions, is unlikely to sink further,” he says.  “And a solution to one or other of the political conflicts cannot be ruled out.”