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Germany: Outlook

Industry Urges Policy Makers Not to Jeopardize Open Markets

| Editor: Rosemarie Stahl

VDMA President Welcker is watching the trend toward nationalist politics in Europe with growing concern.
VDMA President Welcker is watching the trend toward nationalist politics in Europe with growing concern. (Photo: VDMA)

At the annual press conference of the German Mechanical Engineering Industry Association President Carl Martin Welcker demanded open trade without barriers: “We cannot recklessly jeopardize everything we have achieved and let populists take over.”

Mechanical and plant engineering companies in Germany and Europe need open markets and free trade in order to achieve successful exports and secure jobs, claimed the association in a press release. Given the increasingly nationalistic trend in Europe and many other parts of the world, German Mechanical Engineering Industry Association (VDMA) is therefore demanding – especially in 2017, an election year in Germany – that policymakers work harder to maintain free trade and promote the concerns of medium-sized industrial companies. “Walls and protective tariffs are not the answer! The EU and the German government need to make a visible commitment to Germany as an industrial country and thus to securing jobs and prosperity,” emphasized VDMA President Carl Martin Welcker. In view of mechanical engineering's export quota of more than 75 percent, he warned, “Re-establishing trade barriers in a globalized world is the wrong approach and will ultimately disadvantage everyone.”

Slight growth in production expected for 2017

VDMA still anticipates a slight rise in production of one percent in real terms for the coming year. The strain coming from some large developing and emerging countries is expected to reduce, while the slight recovery in the EU partner countries (excluding the United Kingdom) will continue. On the other hand, uncertainty in the UK and USA is set to continue. Exports to China could fall again in the coming year. However, VDMA's latest business climate survey of member companies with operations in China shows that they have recently become noticeably more optimistic. The balance of positive and negative assessments of the current situation has doubled since the summer, to 18 percentage points. Companies there clearly expect to benefit from projects funded with billions of euros from the Chinese government.

The Association anticipates further stagnation in production in 2016 compared to the previous year. In the first ten months of this year, production in mechanical engineering fell by 0.7 percent (inflation-adjusted). Because this fall is largely due to fluctuation in the number of working days, VDMA economists are confident that it will even out again by the end of the year. Production has barely seen any progress since 2012. Capacity utilization in mechanical and plant engineering was 84.6 percent in October, putting it below the long-term average for the mechanical engineering industry (85.9 percent). More than a quarter of the companies (26 percent) complained about barriers to production in October, caused by a shortage of orders. Worldwide turnover of machinery is also stagnating.

“This is certainly not a broad-based economic upturn – and there is no sign of stimulus for growth,” said Welcker. Given this economic environment, he continued, it is remarkable that the number of people employed in mechanical engineering remains above the one million mark in Germany. 1,019,000 people were permanently employed in mechanical and plant engineering in Germany in September.

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