German mechanical engineering seen contracting 17% in 2020

Despite signs of a slight recovery for Germany’s mechanical and plant building industry, weak demand is likely to keep having a noticeable impact on production.

Incoming orders in the sector fell by -16% year-on-year in January-July, and production was down -14%, according to industry federation VDMA. “We therefore expect a -17% drop in production for the year 2020 as a whole,” Kallanish hears from its chief economist, Ralph Wiechers.

The industry is fighting against the consequences of the global coronavirus pandemic and against protectionism in international trade. Moreover, it is challenged by industrial changes, particularly noticeable in the automotive industry, Wiechers emphasises.

Average capacity utilisation fell well below the long-term average of 86%. Between January and July it dropped to 76.1%, its lowest since 2010, VDMA states. For 2021, VDMA economists assume the global economy will recover, albeit hesitantly and not necessarily without disruptions. They expect production to rebound by 2% next year. A prerequisite for further recovery is that the pandemic does not again paralyse markets and supply chains, VDMA notes.