Incoming orders in the German machine tool industry have caught up somewhat

In the third quarter of 2019, order intake in the German machine tool industry fell by 25 percent year-on-year. Orders from Germany fell by 29 percent. Foreign orders lost 23 percent. In the first nine months of 2019, incoming orders fell by 23 percent. Domestic orders were down 22 percent and foreign orders 23 percent.

"The demand for machine tools continues to decline, even though the decline has slowed somewhat at the current margin," comments Dr. Wilfried Schäfer, Managing Director of the VDW (Verein Deutscher Werkzeugmaschinenfabriken), Frankfurt am Main, on the result. Never before had the industry seen itself confronted with such an accumulation of factors, all of which had a negative impact on business: a cyclical downturn coupled with trade conflicts and an unstable condition of the largest customer in the automotive industry.

Compared with the summer months, however, the volume has recently been somewhat caught up in the current marginal of cutting machines, which account for around 70 percent of total production. "We do see an initial EMO effect here," says Schäfer. However, it remains to be seen whether this can be consolidated in the coming months. In terms of forming, orders in September have even turned up again. The foreign project business in particular had a supporting effect.

Overall, the euro countries are worried, with orders falling by well over 30 percent in each of the three months of the third quarter. Oxford Economics, VDW's forecasting partner, does not expect any effective recovery in demand from Europe for the year as a whole either. Scientists are also concerned about business in Asia. As the stimulus provided by US fiscal policy expires, America will also become more difficult. All in all, the international economic climate has deteriorated considerably and is causing restraint in investments, even if the mood at the very current periphery is gently brightening, said Schäfer.

Production forecast 2019 revised

Against this backdrop, VDW has lowered its production forecast for 2019. "In view of the sharp drop in orders this year, it will no longer be possible to maintain the targeted moderate decline in production," continues the VDW Managing Director. The association is now assuming a decline of 4 percent, which will be supported by the realization of the order backlog. However, the gradual stabilization of demand expected in the summer for the second half of the year has not been confirmed. Capacity utilization last fell in October to 86.9 percent after 87.9 percent three months earlier.

"The real problem is foreseeable for the year 2020 due to dwindling inventory orders," says Schäfer. In the current year, hardly any significant buffer can be built up. The anticipated recovery in demand in 2020 is also only very moderate after the deep fall. This is also reflected in the forecasts for international machine tool consumption. With a plus of 4 percent minus in the current year, the best case is still described here as a moderate baseline scenario. The calculation of the rates of change in national currencies also has a stabilizing effect.

Source: VDW           Graphic: Fotolia