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Orders for Large Plants Dampen the Crash of Mechanical Engineering

| Editor: Alexander Stark

During the first six months of the current year, mechanical engineering companies in Germany recorded a significant drop in their order books. The only bright spot were the orders in large-scale plant construction, the VDMA announced.

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Large plants from Germany were in demand outside the euro zone, but otherwise order intake in the mechanical engineering sector was rather gloomy.
Large plants from Germany were in demand outside the euro zone, but otherwise order intake in the mechanical engineering sector was rather gloomy.
(Source: SMS Siemag)

During the first half of 2019, the mechanical engineering sector recorded a decline in orders of 9 % in real terms compared with the previous year. The decline in Germany and abroad was at the same level. "This decline is attributable to the weaker global economy, the numerous mostly politically motivated upheavals and the far-reaching structural change in the automotive industry," explained VDMA economic expert Olaf Wortmann. "These uncertainties are poison for the investment climate.”

In June 2019, order intake in the German mechanical engineering sector was 5 % down on the prior-year level in real terms. While domestic orders fell by 16 % in the reference month, orders from abroad maintained their already high level of the previous year. "The number of large orders from non-euro countries is surprising. The number was already high in June 2018 and has now risen again, resulting in a 2 % increase in orders from non-euro countries. It is extremely rare that an already high level for large-scale plants from the previous year can be maintained, let alone exceeded," said Wortmann. By contrast, mechanical engineering companies in the euro zone recorded a 9 % drop in orders in June.

In the three-month period from April to June 2019, the weakening mechanical engineering economy was also evident, with orders down 8 % year-on-year. Domestic orders decreased by 12 % and foreign orders by 6 %. Orders from the euro countries contracted by 7 %, while orders from non-euro countries fell by 5 %.

According to Wortmann, production in mechanical engineering companies has changed dramatically: "Capacity utilization currently stands at 86.6 %, compared with 91 % a year ago. This is quite a good figure for the industry average, as it is slightly above the long-term average of 86.2 %." However, the order shortage, reported by 27 % of companies, is a cause for concern.

This article was first published by MM MaschinenMarkt.

Original by Stéphane Itasse / Translation by Alexander Stark

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