With a workforce of 1.35 million, mechanical engineering and plant construction is Germany’s largest industrial employer and the backbone of the German economy.
According to the German Mechanical Engineering Industry Association (VDMA), around 6,400 companies belong to this sector and are the driving force behind innovation. With a share of around 10 per cent of total research and development expenditure, mechanical engineering is also one of Germany’s most research-intensive industries.
However, the export business is currently burdened by global trade conflicts and growing signs of an economic downturn. According to the Federal Statistical Office, machine deliveries in the first six months of this year increased by a nominal 0.9 per cent or EUR 800 million to EUR 89.2 billion compared to the previous year. The pace of exports has slowed considerably: after growing 3.8 per cent in the first quarter, mechanical engineering exports actually declined 1.8 per cent to EUR 44.7 billion. “The uncertainty triggered in particular by the trade conflict between the USA and China and the lack of any prospect of agreement in the Brexit dispute are damaging our export-oriented industry”” explains VDMA chief economist Dr Ralph Wiechers. “Investment is declining in China and the UK, particularly in plant and machinery, and growth is also losing steam in the USA,” Wiechers notes.
Between January and June 2019, exports to the USA rose 7.8 per cent to EUR 9.96 billion, thanks to an excellent start to the year. The USA accounts for 11.2 per cent of total German machinery exports. In the same period, exports to China increased only 0.6 per cent to EUR 9.72 billion, so that China now accounts for 10.4 per cent of total exports.
Looking at the current situation in the packaging machinery sector, the VDMA reports: that new orders for food processing and packaging machinery fell 8 per cent year on year in the first half of 2019 (growth of 8 per cent in domestic orders were more than offset by a fall of 10 per cent in foreign orders). New orders for packaging machinery (excluding beverage packaging machines) in June were up 11 per cent on the previous year, with growth of 31 per cent in domestic orders and 7 per cent in foreign orders.
In the first half of the year, new orders for packaging machinery (excluding beverage packaging machines) were down 1 per cent lower in real terms year on year (domestic orders up 27 per cent, foreign orders down 4 per cent).
Production of packaging machines rose 8 per cent to EUR 7.1 billion in 2018. This was not only a record, but also the highest growth rate in the current decade. The “Other packaging machinery” segment grew almost 12 per cent to EUR 4.9 billion, while the “Beverage packaging machinery” increased by 1 per cent to EUR 2.2 billion, only slightly above the previous year’s level.