Engineering decline

The Machines Fall Silent

Generator dpa
One million people work in the German mechanical engineering sector.
  • Why it matters

    Why it matters

    The machine-construction sector has historically been a key driver of the German economy, meaning its stagnation could be felt throughout the country.

  • Facts

    Facts

    • In April, the German machine construction sector predicted 2 percent growth this year.
    • This has now been revised down to zero, mainly because of a drop in business from Russia and China.
    • Orders are 2.5 percent down on this time last year.
  • Audio

    Audio

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As recently as the large Hanover Industrial Fair in April, German machine constructors were full of confidence. The favorable euro exchange rate, low oil prices and healthy private consumption all seemed to point to a growth in production of 2 percent this year – at least that is what the industry association, the VDMA, believed at the time.

Even if there was a cautious start to the year, the machine constructors were still confident they would be able to catch up in the course of the year. But this has proved to be an illusion: On Tuesday the VDMA capped its forecast and now expects stagnation this year at best.

The first months of the year saw orders from home and abroad fall below expectations, and companies had to adapt their production levels accordingly. Up to and including May, companies were 2.5 percent down on last year’s levels – too much to be able to maintain the original forecast.

For months now, machine constructors have been groaning under the burdens of lost business in Russia, which improved orders from the United States have not been able to make up. So one thing is clear: The machinery and plant engineering sector will not be Germany’s economic driver this year.

This timeout by Germany’s biggest industrial employer, which has more than one million employees, will be felt by other industries, too. For example, the steel industry, which in recent months has continually cited the German machine-construction industry as a reason for its own growth expectations.

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