The mechanical and plant engineering sector in eastern Germany continues to recover. In the third quarter of 2021, 80% of companies rated their business situation as "very good" or "good" - a similar number of companies last said this in mid-2019. However, the positive order situation is being overshadowed by clearly noticeable material bottlenecks, above-average increases in material and energy prices and a renewed focus on the shortage of skilled workers. These obstacles to production are also reflected in declining business expectations until the end of the year. This was the result of a survey conducted by VDMA Ost among its 350 members in Berlin, Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia.

"We are seeing well-filled order books and a generally confident mood. At the same time, however, delivery difficulties, spiraling material prices and staff shortages are weighing heavily on companies. If this continues, the catch-up process is at risk," says Oliver Köhn, Managing Director of VDMA East.

Capacity utilization on the rise
The good overall situation to date is reflected in capacity utilization. In the third quarter of 2021, companies were utilizing an average of 86.8% of their existing capacities. This figure climbed by 1.4% compared to the previous quarter and is the highest in two years.

Companies' order backlog has remained constant. On average, it is sufficient for 5.1 months of production until the end of February 2022. Around 80% of companies also recorded an increase in orders or a stable order situation compared to the previous quarter. Köhn is not yet worried by the fact that almost one in five companies saw their order backlog shrink. "More than half of these companies assessed their economic situation as positive. If the order backlog fluctuates in this situation, this is not yet an alarm signal," explains Köhn.

Significant procurement problems
The delayed and unpredictable delivery times for materials such as steel and wood as well as for preliminary products are causing the association's managing director much greater concern. Under this influence, business expectations for the fourth quarter of 2021 have also deteriorated somewhat. Around 14% of companies fear that their business opportunities will deteriorate - around 4% had expected weaker business in the third quarter of 2021. By contrast, almost 86% of companies expect the outlook to remain the same or improve by December 2021.

Köhn is also critical of the sharp rise in energy costs. "These are placing a particular burden on our SMEs in eastern Germany. Grid fees are already higher than in other regions. Now, the increased demand for electricity and gas in particular, as well as the rise in_{CO2 prices}, are making energy considerably more expensive and thus creating an additional burden." He therefore welcomes the recently announced reduction in the EEG surcharge to around 3.7 cents per kilowatt hour from 2022. "However, suppliers must now pass on the savings to customers in full. A reform of energy-related taxes is also necessary," demands Köhn.

Companies are planning new hires
Personnel planning remains buoyant. Between October 2021 and March 2022, around 53% of companies want to keep their current employees and around 38% of companies want to hire new employees. The problem: a shortage of qualified specialists who are willing to travel.

However, short-time work now plays a subordinate role: 15% of companies used this labor market instrument in the third quarter of 2021, primarily to bridge a subdued order situation or delivery bottlenecks. A year ago, this figure was 61% of mechanical engineering companies.