Order Intake in Mechanical Engineering Continues to Decline
The German mechanical engineering industry continues its downward trend: In May 2019, incoming orders fell again by 7% in real terms, the German Mechanical Engineering Industry Association (Verband Deutscher Maschinen- und Anlagenbau e.V.) reported in Frankfurt am Main. The association’s outlook for the entire year 2019 is pessimistic.
While domestic demand almost stagnated (minus 1 %), orders from abroad were 9 % below the relatively high level of the previous year. “Mechanical engineering companies are very much feeling the effects of the weak performance of the exporting industry, and many investors are hitting the brakes", explained VDMA-Chief Economist Dr. Ralph Wiechers. Incoming orders from the euro partner countries fell by 6 % in May, and 10 % fewer orders were received from the rest of the world.
Mechanical Engineering Has Not Yet Experienced a Trend Reversal in Germany
He also did not want to overestimate the comparatively good domestic demand. “This is just a single monthly figure and not yet a trend reversal," Wiechers said in an interview with MM Maschinenmarkt, and continued: "According to our forecast, domestic demand is expected to be strong in the current year, but so far it has developed just as weakly as foreign demand."
In a three-month comparison from March to May 2019, orders were 9% down on the prior-year figure in real terms. While domestic orders fell by 11 %, incoming orders from abroad declined by 8 %. Orders from the euro zone fell by 5 %, and from non-euro countries by 10 %.
Large Orders Distort Statistics
In a three-month comparison, there were only a few rays of hope in the individual sectors. “Mining machines have developed positively, but this is only a small sector. One large order is enough to ensure that the figures are positive," explained the VDMA chief economist in an interview with our editorial team. The situation is similar in the Power Systems division, which is also heavily dependent on major orders. The worst developments from March to May were in foundry machinery, thermal process technology and machine tools.
Meanwhile, the VDMA has lowered its production forecast for 2019. The order situation and real production in mechanical engineering have weakened considerably in the first few months of the current year, and looking ahead does not currently promise any improvement, the association reported in press release. “Therefore, a revision of our forecast is unavoidable; we now expect production to decline by 2 % in real terms in 2019," explained VDMA President Carl Martin Welcker.
This was despite the high order backlog, which was enough for 8.5 months in April. This is because they are unevenly distributed across companies and industries and cannot completely dampen the sharp drop in incoming orders by the end of the year. Previously, VDMA economists had expected a slight increase in production of 1 % for 2019. In the first four months of the current year, production in the mechanical engineering sector stagnated compared to the previous year; according to preliminary figures, in April it was 0.8 % below the previous year. In the first five months of the current year, order intake in the mechanical engineering sector was 9 % lower than in the previous year. Capacity utilization still reached 87.4 % in April.
This article was first published by MM MaschinenMarkt.
Original by Stéphane Itasse / Translation by Alexander Stark
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