Mechanical engineering companies from Germany are having to hold their own in an increasingly difficult economic environment. The year 2019 was characterized by a weak global economy, increasingly harsh threats and sanctions in global trade disputes and a profound structural change in the automotive industry. "These three developments were largely responsible for the fact that incoming orders and production in 2019 slipped significantly below the previous year's level," said VDMA President Carl Martin Welcker at the association's annual press conference in Frankfurt.

Production in the German mechanical engineering sector fell by 1.8% in real terms in the first ten months of the year compared to the previous year, while incoming orders fell by 9% in the same period. At 83.9 percent, capacity utilization in October was below the long-term average of 86.2 percent. "Our industry is not in crisis, but many of our customers are unsettled and are currently postponing or stopping their investments. We will therefore probably close 2019 with a 2% drop in production to around EUR 218 billion," said Welcker.

No new momentum in sight in 2020
For the coming year, VDMA economists continue to expect a further decline in production of two percent in real terms. A rapid improvement is not in sight. The order books will only fill up again in the course of the year, assuming more positive business climate data. Due to technical lead times, these orders will not lead to production growth again before the second half of the year.

The prerequisite for this is that the trade war between the US and China in particular does not escalate further. "The economic easing currently being observed in Germany and on important foreign markets is little more than an end to the downward process. It may usher in a slight recovery over the course of 2020 and hopefully it will. However, it is too early to sound the all-clear, as global economic development continues to be burdened by a high degree of uncertainty," said the VDMA President.

Good employment situation comes under pressure
The good employment situation in the German mechanical engineering sector could therefore also come under pressure. In September 2019, there were a total of 1.073 million employees in companies with more than 50 employees, up 0.6% on the previous year. This means that mechanical engineering remains the largest industrial employer in Germany and is also the most important engineering employer. A record figure of 200,000 engineers were recently employed in the mechanical engineering sector. "However, we must assume that we have seen the peak in employment. Companies will do everything they can to retain their skilled workers even in difficult times - but whether everyone will succeed is questionable. So far, many companies have benefited from order backlogs. But the ceiling is getting thinner. Every third company, 35 percent to be exact, is now complaining about a lack of orders," said Welcker.

USA outstrips China in the export rankings

Exports by mechanical engineering companies from Germany increased by a nominal 0.6% year-on-year to 134.6 billion euros in the first nine months of 2019. The USA remained the most important sales market (up 6.2% to 15 billion euros). In contrast, business with China (second place in the export ranking) shrank by 0.7% to 14.1 billion euros. This reflected the consequences of weaker domestic growth in the People's Republic and the trade war with the United States. Exports to the USA, on the other hand, were still able to benefit from the impetus provided by the corporate tax reform there, although VDMA economists expect US growth to be less dynamic in 2020. The repeatedly postponed Brexit decision is now also having a clear impact, with exports to the United Kingdom falling by 4.8% to just under EUR 5.7 billion.

The country thus slipped to sixth place in the rankings. In the first nine months of the year, mechanical engineering companies from Germany exported goods worth 64.6 billion euros to the European Union's neighboring countries - an increase of 1.1 percent compared to the previous year. as