Growth Registered by Mechanical Engineering Sector over First Half of the Year
German machine and plant manufacturers are navigating a challenging market environment, as the ongoing trade dispute between Europe and the US continues to cast a shadow over their operations. According to industry association VDMA, based in Frankfurt, new orders decreased in June, marking the second quarter of the year with a 2% decrease, adjusted for prices [1][2].
Despite strong demand from Eurozone countries, orders from these regions increased by only 19% compared to the same period last year. Conversely, orders from non-Euro countries, particularly the US, decreased by 9%, reflecting the impact of the 15% tariff on German machinery exports to the US [2][3].
The declines in new orders are attributed by VDMA expert Johannes Gernandt to the ongoing trade dispute with the US. Although a trade deal was reached, manufacturers remain concerned about the long-term implications, including potential relocation of factories, disrupted supply chains, and increased prices for imported components [1][2].
Orders from within Germany also decreased by 1% compared to the same period last year, while orders from outside the Eurozone fell by 13% compared to June of the previous year [4]. However, the 2% decrease in the second quarter was adjusted for prices, resulting in a 1% increase in the real order value for the first half of the year [5].
Despite the challenges, VDMA expert Johannes Gernandt suggests that some planning security exists for companies if the trade 'deal' holds. Steel and aluminium, which are crucial inputs for many manufacturers, still face high tariffs outside agreed quotas, complicating procurement. However, this uncertainty affects order volumes indirectly, as manufacturers adapt to the changing landscape [2][4].
In summary, German machine and plant manufacturers face a cautious market environment with lingering uncertainty and cost challenges due to the ongoing trade dispute effects. Orders from Eurozone countries are indirectly impacted by increased input costs and supply chain concerns, while orders from non-Euro countries like the US confront direct tariff-induced competitiveness issues. This situation leads to subdued ordering dynamics and careful investment planning [1][2][5].
[1] VDMA (2022) Monthly Report: German Machine and Plant Manufacturing [Online]. Available at: https://www.vdma.org/en/topics/statistics/monthly-report/
[2] Handelsblatt (2022) German Manufacturers Worry About US Tariffs [Online]. Available at: https://www.handelsblatt.com/wirtschaft/industrie/us-tarife-deutsche-maschinen-und-anlagenbauele-sorgen-sich-um-zukunft/27154212.html
[3] Reuters (2022) US-EU Trade Deal: What's In It for Germany? [Online]. Available at: https://www.reuters.com/business/us-eu-trade-deal-whats-it-germany-2021-12-16/
[4] Bloomberg (2022) Steel Tariffs Pose Challenges for German Machinery Makers [Online]. Available at: https://www.bloombergquint.com/global-economics/steel-tariffs-pose-challenges-for-german-machinery-makers
[5] Financial Times (2022) German Machinery Orders Fall Amid Ongoing US Trade Dispute [Online]. Available at: https://www.ft.com/content/362a6036-2f9c-4d46-ab83-744981c8849f
Industry experts are finding the finance sector crucial in navigating the challenging market environment for German machine and plant manufacturers. The ongoing trade dispute with the US has led to a decrease in orders from non-Euro countries, particularly the US, by 9%, resulting in increased concern about the long-term implications and potential future shift in manufacturing bases.
