German machine tool industry hopeful of rebound this year

At the association's annual press conference, chairman Dr Heinz-Jürgen Prokop said an improved mood in the economy is raising the willingness to invest.

"After two years of great restraint, there is now a strong need to make up ground," he said.

The global Purchasing Managers' Index and the German ifo Business Climate for the capital goods industry are on course for growth. China is now the principal driving force behind the global economy. The US, too, is providing a boost following US president Biden's election victory.

"However, the prerequisites for companies' regaining their confidence and investing are beating the corona pandemic and sketching out a sensible roadmap for gradually emerging from lockdown," said Dr Prokop.

The automotive industry in particular, the largest customer for machine tools, is benefiting from the upswing in China. Electronics, food processing, logistics and parts of the medical technology sector having been doing good business anyway during the crisis. This is set to continue.

In Europe, too, investments are expected to rise again by 10% after the major slump. The last two years have been very difficult for many reasons, but this restraint is now having a positive effect on the machine tool industry. Oxford Economics, the VDW's forecasting partner, is predicting strong growth of 35% for orders in 2021. There were already indications of this in November and December.

"Nevertheless, it won't be easy to get back to pre-corona levels," explained Dr Prokop.

Orders fell by 30% in 2020 due to the coronavirus crisis, following a decline of a similar magnitude the year before. All other key figures also slipped deep into negative territory in 2020: production was down 31%, exports down 29%, domestic sales down 33%. The hoped-for turnaround in the current year is thus starting from a low level.

In 2019, capacity utilisation was still at 88%. The decline in orders caused this to fall to just under 72% in 2020. This is comparable to the levels seen following the 2009 financial crisis.

The annual average of employee numbers fell by 4.5% to 70,000 in 2020. He added: "Given the sharp decline in production, it's obvious that companies are trying to keep their highly skilled employees for as long as possible. The instrument of short-time work remains useful and necessary here," said Prokop.

Despite the high losses, German manufacturers have performed well when compared internationally. The German industry accounts for a 16% share of international production, ranking behind China but ahead of Japan. It also remains the world export champion, taking a 20% share, ahead of Japan and China.

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