VDMA revises 2017 forecast for Germany’s mechanical engineering sector

May incoming orders for capital goods surpassed the previous year’s level by 17 per cent in real terms, suggesting a positive outlook for Germany’s mechanical engineering sector.

“The mood in the companies is exceptionally good. Everything is set for a new upswing,” says VDMA Chief Economist, Dr Ralph Wiechers.

The association revised its annual forecast upwards from previously one per cent (as of October 2016) to plus three per cent in real terms. In the period from January to April, production recorded a growth of 2.3 per cent compared to last year.

There are three main drivers for this: Orders from the EU increased considerably over the first five months of the year than expected. Secondly, there is justified hope that domestic business will pick up more significantly than was previously forecast.

“Customers in the manufacturing sector remain positive, capacities are well-utilised and there is an investment and modernization backlog,” explains Dr Wiechers.

Thirdly, business in Asia, and particularly in China, is developing better than expected, with machinery exports from Germany to China increasing by 15 per cent in the first four months of the current year.

However the situation remains delicate, Dr Wiechers cautioned. In the face of current developments in important customer countries – most notably the USA and the United Kingdom – the Mechanical Engineering Industry Association sees obstacles which stand in the way of reaching a growth of three per cent.

In May, orders from abroad increased by 23 per cent in real terms compared to the previous year. The orders from EU partner countries continued and surpassed the positive trend of the past months with a plus of 34 per cent. For the first time this year, demand from non-euro countries saw a double-digit growth rate with plus 20 per cent. Domestic orders also showed a favourable growth of five per cent in May.

In the three-month period from March to May, incoming orders in German mechanical engineering increased by four per cent in real terms compared to the previous year. Orders from abroad increased by four percent with EU partner countries recording an increase of 23 per cent and non-euro countries recording a minus of one per cent. A two per cent increase was recorded for domestic orders.