Despite anticipated recuperation, VDMA experiences no expansion in growth.
Despite anticipated recuperation, VDMA experiences no expansion in growth.
Lower interest rates, as perceived by German machinery manufacturers, might instigate an economic upswing. However, the industry boasting a million workers hasn't observed a shift yet. Consequently, numerous businesses might trim their workforce slightly.
According to Bertram Kawlath, president of the VDMA association, the industry anticipates a decrease of eight percent in production this year and an additional two percent reduction in 2025. This marks the first time in many years that Germany's one million-strong machinery sector faces potential job cuts. Although decreasing interest rates in 2025 could also stimulate international investment readiness and potentially initiate economic recovery, an unprecedented global economic surge is improbable.
Utilization of capacity plummeted to 79.1 percent in October. "This is a stark underutilization," explained Kawlath. "More and more companies can no longer cater to production demand adequately, given the steep decline in orders." The mechanical engineering sector saw a 6.8 percent decrease in production in the first ten months of this year, as per preliminary data.
The majority of medium-sized companies, which encompass both listed entities like Thyssenkrupp, Siemens Energy, and GEA, are grappling with cautious consumer investment. Anxiety is rampant, said Kawlath. The reasons include conflicts, trade disputes, and the political success of extremist parties and figures. Companies require unwavering and dependable economic policy. "Minimize excessive regulation, relaxed technological requirements, and also relief from excessively high operational costs within Germany."
Producers of 'Made in Germany' machinery and equipment are the foundation of the German economy. Despite waning demand, they do not anticipate significant job losses in the coming year, according to Kawlath. The workforce might decrease by an insignificant number, following the projected two percent production fall. The industry's total workforce is projected to remain at one million. "Companies are striving to retain their core workforce." Companies are looking ahead five to six years. "The skilled labor shortage remains a concern." According to a survey of over 500 associate companies, 61 percent of respondents expect job cuts in the next 12 months, while just 20 percent anticipate job creation. "Large companies are particularly pessimistic," said Kawlath.
The export-focused industry is preparing for Donald Trump's return as US president in January. Additional turbulence is imminent in US business, predicted Kawlath. "Trump 2.0's era will be more rupturing than the first term. We are prepared for more disruptions, but we still believe that the US market will offer opportunities for us." A survey of 560 VDMA member companies revealed that 72 percent of respondents intended to expand or establish their business in the US. The country still needs essential investment goods from Europe and Asia to reindustrialize, according to Kawlath. "In the long run, we see this as an opportunity."
The USA and China are the most significant foreign markets for machinery manufacturers. The rivalry between the nations is likely to escalate, predicted the association chief. "We see a fierce competition for global supremacy here, which China aims to decree in its favor by 2049." German and European machinery manufacturers must prepare for this competition.
In light of the economic forecasts, Kawlath, the VDMA association president, anticipates a 8% decrease in production this year and an additional 2% reduction in 2025, potentially leading to job cuts within the machinery sector for the first time in many years. Despite the industry's cautious outlook, economic forecasts suggest that decreasing interest rates in 2025 could stimulate international investment readiness, potentially initiating economic recovery.