Uncertainty clouds german mechanical engineering business

Uncertainty clouds german mechanical engineering business

In real terms, the companies received eleven percent fewer orders than in the previous year, according to the german engineering federation (VDMA) in frankfurt. This was the tenth time in a row that incoming orders were below the level of the previous year.

"August was a rainy month for german machinery and plant manufacturers," said VDMA chief economist ralph wiechers. "Domestic business disappeared again, we have a minus of 18 percent as already in july. Foreign business was not able to compensate for this downturn this time, with a minus of six percent."Fewer orders were received from both euro partner countries (down nine percent) and non-euro countries (down five percent) – wiechers sees this as an indication of the current high level of uncertainty.

Machinery manufacturers were not the only sector to be hit by the slump in investment. From the point of view of the state-owned forderbank k, the good investment boom in germany has come to an end: "weak global growth combined with the recession in the euro zone led to restraint in companies’ capacity planning," the banking group reported on monday.

In the second quarter, business investment fell more sharply than expected, shrinking by 1.7 percent in 2012 compared with the previous year. K-chief economist jorg zeuner fears: "unfortunately, we have to expect a further decline in corporate investment in the coming winter half-year."A slow recovery will not set in until 2013, after the global economy has bottomed out.

Meanwhile, the engineering sector is counting on a bailout from the permanent euro bailout fund ESM and the announced purchase of government bonds of distressed countries by the european central bank (ECB). "We expect order intake to pick up again in the coming months as soon as the ESM and ECB take effect with potential investors," said VDMA economic expert olaf wortmann. However, the VDMA initially expects poor business in the fourth quarter, and the first quarter of 2013 may also be difficult.

From the association’s point of view, the current situation in the industry is mixed: "we have positive growth rates in production and sales of between four and six percent. Exports are actually expanding by 8.5 percent – the downturns in china and other european markets can be more than compensated for by good business in russia, but above all in the USA," wiechers emphasized.

Employment had also risen until recently. At the end of july, companies employed 974,000 people – 26,000 more than at the end of 2011. However, the willingness of the companies to hire had dropped recently: "here we expect a stabilization – i.E. No further buildup, but also no reduction."

After a surprisingly strong start to the year, the VDMA had recently raised its annual forecast for production from stagnation to plus 2 percent. "For 2013, we are also assuming a plus of 2 percent," said wiechers. The machinery manufacturers expect a weak start to the year, after which business activity will pick up and production will pick up again: "overall, the machinery manufacturers are staying on course."


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