Production in Germany’s mechanical and plant engineering sector fell well short of expectations in the first seven months of 2024, reporting a decline of 6.8% year-on-year, says industry association VDMA.
“The economy was rather disappointing in this period. Although we had not expected a recovery, we had banked on a sustained stabilisation at a low level,” says VDMA chief economist Ralph Wiechers. This failed to materialise: incoming orders and numerous business sentiment indicators suffered significant setbacks, he adds. VDMA has therefore reduced its production forecast for full-year 2024 from a 4% decline to an 8% drop on-year.
According to economic research institute IFO, machine capacity utilisation at companies was 79.4% in July. The figure is significantly below the average range – 84.4% to 89.1% – and therefore well below the so-called comfort zone, VDMA emphasises.
Incoming orders in the first seven months were 11% below the previous year’s figure in real terms. While there were signs of a trough in both foreign and domestic orders up to and including April, “the picture changed for the worse from May onwards”, Kallanish hears from Wiechers.
He cautions that a noticeable improvement in the situation is currently not expected, in view of uncertainty in the global economy, due for example to wars and trade disputes. “Assuming that incoming orders will bottom out towards the end of this year, we will have to prepare for downturns in downstream production compared to the previous year for at least the first half of 2025,” he predicts.
Wiechers nevertheless sees a silver lining in that inflation might continue to fall almost worldwide. “There is therefore a legitimate chance that positive monetary policy will stimulate the economy at the end of the year and over the course of 2025,” he concludes.
Christian Koehl Germany
