German mechanical engineering remains strong despite gloomy mood

Germany’s mechanical engineering industry did not fare too badly in the first half of the year, although the war in Ukraine has spurred a negative sentiment in more recent months.

H1 order books showed a small overall increase of 2%, which was mainly driven by foreign orders. “Many customers still wanted to invest in new machines and plants, although there is increasing reservation,” says Ralph Wiechers, the chief economist of industry federation VDMA. Nominal turnover grew by 7%. “This needs to be assessed against rising inflation, so, roughly, it is in line with the growth in order intake,” Kallanish hears from Wiechers.

Clouds over the industry descended further in the second quarter, when companies recorded a decline in orders of 2% in real terms compared to the previous year. Domestic orders fell by 8% from April to June, while orders from abroad increased by 1%, especially in eurozone countries. In June, new orders were down 9% compared with the same month of the previous year, with the decline seen inland as well as abroad.

“After the mood indicators deteriorated considerably in the past months, the minus in June is hardly surprising,” says Wiechers. Disruptions in global supply chains continue to weigh on business, as do order cancellations as a result of the war in Ukraine. He expresses overall satisfaction with the performance of the first half, but notes that “the second half could become critical”.

Christian Koehl Germany