Market scenario Insight into the global mechanical engineering industry
The current mechanical engineering industry is going through a tough phase. Leading industrial machinery exporters such as Germany, China and the USA are all experiencing a slowdown. We bring you an insight into all the market happenings of this specialised sector.
Mechanical engineering is one of the oldest and broadest branches of engineering. The sector is highly appreciated owing to its significant contributions to the economy. In the midst of global economic slowdown, MM International highlights the market scenario of some of the major countries dominating this mighty industry.
Incoming orders and production in mechanical engineering has slowed down in Germany, which is the biggest exporter of machinery in this space. In fact, the German mechanical engineering industry expects production to fall by 2 % in 2020, according to a report by the Mechanical Engineering Industry Association (VDMA). The major reasons behind this downfall are the ongoing US-China trade war and growing protectionism across the world.
Apart from this, there are other elements too such as the global economic downturn, Brexit and structural change in key customer groups which have adversely affected the mechanical engineering industry in the European country. The report adds that this year, production fell in the first seven months by 0.9 % compared with the previous year and is now negative. Dr. Ralph Wiechers, Chief Economist, VDMA reveals, “While the first quarter of 2019 showed a plus of 0.3 %, production in the second quarter declined by 2.9 % compared to the previous year.” In this scenario, investment is also suffering especially in the automotive sector.
The world's largest producer of machinery and occupying the second position after Germany in terms of exports, China is also witnessing a slowdown. The China Machinery Industry Federation reports that since the beginning of the year, the growth rate of the machinery industry has sharply risen from 2 % in the first two months of the year to 6.3 % in the first quarter and fell to 4.2 % in the first half of the year. It is not only 4.2 % points lower than the same period last year, but also lower than the national average for industry and manufacturing in the same period.
The federation adds that in the first half of the year, the machinery industry achieved an increase in operating results i.e. 1.29 % and a decrease of 8.58 % in overall result over the previous year. The growth rate of the two indicators has fallen sharply compared to the previous year: the overall profit growth rate has changed from negative to negative and, for the first time in more than a decade, there has been negative growth.
It further goes on to state that the decline of the automotive industry has majorly affected the growth of the machinery industry. However, the consequences of the trade war can’t be ruled out. A report by VDMA mentions that in the People's Republic, the effects of the tariff war are becoming increasingly noticeable, which, in addition to weakening growth anyway, is leading to stagnating, and in some cases even declining sales in the notable industrial sectors.
The USA is also one of the major industrial machinery exporters in the world. This market focuses on providing highly sophisticated technology for various manufacturing and service industries. Like China, the trade war has affected the US mechanical engineering industry too. A VDMA report states that investment momentum in the country has slowed significantly, and there are increasing signs that the American industry is also suffering from the trade dispute with China. On Germany’s exports to the USA, the report mentions that between January and June, exports to the United States rose by 7.8 % to 9.96 billion euros thanks to an excellent start in to the year. The USA accounts for 11.2 % of total German machinery exports.
The current situation around the world is not looking good. We hope that the overall mechanical engineering industry revives soon.