German machine tool industry continues its decline

Orders received fell by 23% in the first nine months of 2019. Domestic orders were down 22% in this period, with foreign orders 23% lower.

"International demand for machine tools is continuing to decline, although the levels have recovered slightly just recently," said Dr Wilfried Schäfer, executive director of the VDW (German Machine Tool Builders' Association).

The industry has been confronted with an accumulation of factors that have had a negative impact on business: a cyclical downturn, coupled with trade conflicts and the automotive industry.

Compared with the summer months, however, the volume has recently stabilised somewhat for metal cutting machines, which account for around 70% of total production.

"We are seeing the first EMO effects here," Dr Schäfer commented. However, it remains to be seen whether this will stabilise in the coming months.

Overall, order levels from the Eurozone are concerning. These fell by over 30% in each of the three months of the third quarter. Oxford Economics, VDW's forecasting partner, does not expect any substantial recovery in demand from Europe for the year as a whole.

Against this backdrop, VDW has lowered its production forecast for 2019.

"In view of the sharp drop in orders in the current year, it will no longer be possible to maintain the predicted moderate decline in production," continued Dr Schäfer.

The association is now assuming a decline of 4%, with even this figure being supported by the clearing of the order backlog. The gradual stabilisation in demand which was expected in the summer for the second half of the year has failed to materialise.

"The real problem will come in 2020 when the backlog of orders has been cleared," said Dr Schäfer. In the current year, there is no longer any real chance of building up a significant buffer. The anticipated recovery in demand in 2020 is also only likely to be moderate after the sharp fall.

VDW www.vdw.de