Market analysis Germany: Tool industry running into good form

Editor: Susanne Hertenberger

Major projects boost mid-year figures to a healthy level. In the second quarter of 2016, order bookings in the German machine tool industry rose by 16 per cent compared to the preceding year’s equivalent period.

Order intake of the German machine tool industry.
Order intake of the German machine tool industry.
(Bild: VDMA, VDW)

Domestic orders were up by 19 per cent, while demand from abroad increased by 14 per cent. The euro zone contributed growth of 37 per cent, and non-euro zone nations a 10 per cent rise in orders. In the year’s first half, order bookings increased by a substantial 12 per cent compared to the preceding year’s figure. While domestic order bookings rose by 10 per cent, orders from abroad were also up, by 13 per cent. All in all, order bookings are developing auspiciously.

Good domestic business

“The year’s second quarter, too, signals a green light for an overall rise in orders during the current year. Our business is running significantly better than we expected at the beginning of the year. The sector can point to a sound, balanced performance over the year’s first half,” comments Executive Director of the sectoral organisation VDW (German Machine Tool Builders’ Association) in Frankfurt am Main, Dr. Wilfried Schäfer. The higher level of demand results primarily from good domestic business and in particular from automotive projects in China and Mexico. Thus the substantial rise in orders is equally attributable to both domestic orders and exports. With reference to the first half of 2016, one-off effects are primarily responsible for the auspicious order situation. Abroad, machining centres and milling machines are benefiting particularly from large-scale orders.

All other metal-cutting technologies, plus significant areas of forming technology, however, are performing less in terms of orders from abroad. On the domestic scene, by contrast, the picture is somewhat different. To quote Dr. Schäfer: “Metal-cutting is two per cent up, and the current as-is situation gives reason to hope that a broad spectrum of technologies can benefit from this.”

Increasing employment in the machine tool industry

Turnover in the first half of 2016 ended up slightly better than break-even. “In view of the encouraging development of orders in the year’s first six months, and the range of order backlogs, now recovered to over seven months, we are anticipating a perceptible rise in turnover for the upcoming period,” says Schäfer. This, he added, is conditional on demand levels remaining stable in the year’s second half as well, particularly on the domestic market. Germany’s industrial sector is in good shape, and exhibits impressive pricing structures and competitive efficacy. The ifo Business Climate Index, for instance, contrary to analysts’ expectations, recovered again in July. “Despite Brexit, the business cycle is holding up well, and showing no significant signs of deterioration,” explains Dr. Schäfer.

Employment remains at a high level. This is an indication that the German machine tool manufacturers, despite cyclical fluctuations, are keeping themselves fit to face the challenges of the future. “The sector is entering the year’s second half in improved condition, and is continuing to invest in qualified staff,” emphasises Dr. Schäfer. In May 2016, almost 69,000 people were employed in the machine tool industry – a slight increase of around one per cent over the preceding year.

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