Germany's export-oriented mechanical engineering sector is increasingly suffering from the turmoil on the international markets. In particular, the still unresolved trade dispute between the USA and China is causing problems for companies, as it is having a direct and indirect impact on more and more sectors and countries.

A recent VDMA survey of German mechanical engineering companies in China shows that the mood there is also suffering from the trade conflict. 40% of the companies surveyed described their current business situation as "poor" and a further 40% as "satisfactory". These are the worst figures since this VDMA survey began three years ago. And companies in China do not expect the situation to improve in the fourth quarter of 2019 or the first quarter of 2020.

Decline in incoming orders

As a result, trade disputes, increasing protectionism around the globe and the unresolved Brexit are leaving their mark ever more clearly on the mechanical engineering sector's books - as is the far-reaching structural change in the automotive industry. Overall, orders in the mechanical engineering sector in the first eight months of the year were 9% lower in real terms than in the previous year.

According to preliminary figures, production fell by 1.6% in the same period. "It is still unclear whether we are only in a phase of economic weakness or at the beginning of a real recession. But a rapid upturn is definitely not in sight," says VDMA President Carl Martin Welcker. "We are therefore sticking to our production forecast, which predicts a real decline of 2 percent for both this year and 2020."

Short-time work becomes more important again

In July, 1.06 million people were employed in mechanical engineering companies with more than 50 employees. This was 1.1 percent more than in the previous year. And many companies are still looking for skilled workers, for example to implement the digital transformation.

However, short-time work is becoming more significant again in view of the slump in orders in some branches of mechanical engineering. In the first half of the year, an estimated 5,000 people in the mechanical engineering sector in Germany were on short-time work, compared to just 3,200 employees in the first quarter of 2019. "Should there be a further economic downturn in the country, it would make sense to extend short-time work to 24 months - as was the case in the crisis year 2009. Clarity on this must be created now so that companies can plan," says Welcker. The VDMA is calling for it to be written into law now that the Federal Employment Agency will once again pay social security contributions if companies then provide their employees with further training.