Decline in Orders Placed with German Machine Manufacturers - Reduced Demand for German Mechanical Engineering Products
In a recent report, the German mechanical and plant engineering sector has seen a decline in new orders during the second quarter of 2023. Orders were 5 percent fewer than in the same month the previous year.
The declines in orders are primarily attributed to the ongoing trade dispute with the US, according to VDMA expert based in Frankfurt. Orders from non-Eurozone countries decreased by 9 percent compared to the same period last year, which may be a reflection of the impact of the dispute.
Interestingly, the growth in the first half of the year in Germany's mechanical and plant engineering sector was solely due to increasing demand from Eurozone countries. VDMA chief economist Johannes Gernandt stated that this growth could be a positive sign that Europe is strengthening its own location.
However, the sector experienced a significant decrease in new orders in June, with orders from outside the Eurozone falling by 13 percent compared to the previous year. Despite this, the first half of the year still saw a slight increase in real order values of 1 percent, according to the VDMA.
The ongoing trade dispute with the US is not the only factor affecting the industry. The entire second quarter of 2023 saw a 2 percent year-on-year decrease in new orders in Germany's mechanical and plant engineering sector. This decline was influenced by muted order intake overall and external factors such as currency-translation effects and business cycle dynamics.
The impact of the planned 15 percent tariff on imports into the US cannot yet be assessed. As the situation develops, it will be interesting to see how it affects the sector's performance in the coming months.
In conclusion, the decline in German machinery orders in Q2 2023 was mainly due to the high baseline effect from the previous period, regional order intake disparities, and wider economic factors including subdued industrial activity and business sentiment in manufacturing and trade. The ongoing trade dispute with the US appears to be a significant contributing factor to the declines in orders.
- To mitigate the ongoing trade dispute impacts and promote growth, the German mechanical and plant engineering sector could consider implementing a community policy that focuses on vocational training programs to prepare a skilled workforce for the industry.
- As the German industry faces financial challenges due to the decline in new orders, it might be beneficial to explore partnerships with other countries for vocational training exchanges, aiming to enhance the sector's adaptability and competitiveness in the global market.
