German machinery and plant manufacturers are confirming the production forecast of 1% for 2014 that they first issued in the summer. “In the first ten months of the year, production of machinery and plants in Germany was up 1% year-on-year in real terms. We are therefore very optimistic that we will achieve our forecast,” said VDMA President Dr Reinhold Festge at the Association’s annual press conference in Frankfurt on Thursday. “All in all, sales of €212 billion and production totalling €199 billion in 2014 mean we exceeded the previous records for both of these figures from 2008 (sales of €208 billion and production of €196 billion),” said Festge.
Employment exceeds the 1 million mark
“Our employees are the clear winners from this strong overall performance,” emphasised the VDMA President. “However, I also see this growth in employment as an important investment in the future.” The number of employees hit the 1 million mark again in May for the first time since 1993. In October, a total of 1.011 million people were working in the mechanical engineering industry. That is 1.7% or 16 000 people more than in the same month last year. As reasons for the increase – in light of the moderate production growth – Festge cited primarily the huge challenges (Industry 4.0, pension age of 63, demographic change) that the mechanical engineering industry can surmount only with qualified staff.
Outlook for 2015: Production forecast of +2% confirmed
For 2015, German mechanical engineering companies are maintaining their production forecast of +2%. The production value could exceed the €200 billion threshold for the first time in 2015 at €205 billion. “Our incoming order volume to date has laid the foundations for this. In the first 10 months, incoming orders were up 2% year-on-year after adjustment for price changes,” reported Dr Festge.
However, he also indicated that there are still incalculable risks, such as the Russia/Ukraine crisis, the sluggish pace of reforms in France and Italy and the restrictive effect on growth from laws introduced by the German federal government in recent months.
Mechanical engineering companies see opportunities primarily in the re-industrialisation process in the US. The low commodity prices are also stimulating the global economy. The decline in the external value of the euro also helps. “In the past, the overvalued euro reduced margins and also prevented a few deals. Of course, it is still the case that strong demand is more important for mechanical engineering companies than a low exchange rate,” explained Dr Festge.
Exports up slightly on previous year’s level
Exports amounted to €112.6 billion in the first nine months of the year, thus slightly exceeding the previous year’s level of €112.1 billion. This represents a nominal increase of 0.5%. The major markets are developing positively: the EU partner countries posted a rise of 5%, while China recorded a 2% increase. The US market grew by 6% and the markets in Southeast Asia by 9%. Africa posted growth in both the North region (+11%) and the West region (+7%). The Middle East expanded by 4% in total, benefiting in particular from the upturn in Iranian business (+20%).
Weaker demand was experienced by mechanical engineering companies in some major emerging economies and countries neighbouring the EU. Australia, Brazil, South Korea, India, South Africa and Turkey all posted double-digit declines in comparison to the previous year. Deliveries to Ukraine fell by a third, while exports to Russia were down 16%. “This was undoubtedly due not only to sanctions, but also to the sharp drop in the rouble exchange rate and the decrease in oil revenues,” said Dr Festge.
Domestic market on growth track with rise of 3%
The domestic market is also on a growth track. “In the first 10 months, sales in Germany were up 3% year-on-year,” reported the VDMA President. “I do not wish to deny that we had expected more. We are one of the victims of the continuing lack of investment in Germany.”
German imports of machinery also increased by almost 5% to €44.3 billion in the first three quarters. Approximately €27 billion came from the EU partner countries. “Our location is therefore not an isolated market, but rather an extremely open and highly competitive market – a fact that everyone benefits from. This is something that we should not forget in light of the discussions regarding the benefits of the Transatlantic Trade and Investment Partnership TTIP,” said Festge.
Politics weakening industrial location – Agenda 2025 is overdue
This is not what an investment-friendly economic policy looks like, said the VDMA President critically on the topic of the political decisions on pension, wage and employment policy that have been made in recent months. “Instead of perpetuating the solidarity surcharge contrary to all previous commitments, the federal government should finally reduce any subsidies to a fixed percentage of, say, 5% or more,” urged Dr Festge.
According to Dr Festge, the lowering of the pension age to 63 is particularly painful for the mechanical engineering industry. A trend survey by the VDMA last week showed that 74% of those who leave companies at the age of 63 belong to the category of skilled workers and master technicians. “We are thus heading for a difficult situation at one of the core areas of production. “This is really hurting us,” said the VDMA President. Politicians must finally remember their responsibility for creating investment-friendly conditions, he commented. “There must not be any tax increases, including hidden tax increases, just because public funds have been plundered under the pretext of social justice. More than enough benefits have been handed out over the past twelve months. “A new agenda, an Agenda 2025, is now overdue,” the VDMA President emphasised. “But for the moment we would be satisfied if politicians would at least stop destroying Agenda 2010.”
Adapted from press release by Katherine Guenioui
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