VDMA: German machinery manufacturers see no growth impetus from foreign trade

The country’s industry body, VDMA, says that while exports in the first nine months of 2019 remain positive at 0.6 per cent, exports are down 1.1 per cent in Q3 2019, with France a bright spot for German machinery exports.

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A synchronised slowdown in the global economy, alongside increasing protectionism and trade conflicts, are leaving their marks on German machinery exports. According to the country’s Federal Statistical Office, machine deliveries in the first nine months of this year increased by 0.6 per cent (in nominal terms) compared to the same period of the previous year, to total €134.6 billion.

In the first quarter of 2019, exports grew 3.9 per cent compared to Q12018. In the second and third quarters of 2019, however, mechanical engineering companies recorded an export decline of 0.8 and 1.1 per cent respectively. “A trend reversal is not in sight for the time being. For months now, mechanical engineering companies have been recording declines in orders both at home and abroad,” said VDMA Chief Economist Dr Ralph Wiechers. “In this respect, it will be difficult to maintain the nominal increase in exports for 2019 as a whole.”

Growth momentum slows in exports to USA

Between January and September, exports to the United States – the number one destination for German machinery exporters – rose by 6.2 per cent to €15.02bn. The USA thus accounted for 11.2 per cent of total German machinery exports over that period. In Q3 2019, machine exports to the USA increased by 3.2 per cent. However, compared with the first half of 2019 (plus 7.8 per cent), the pace slowed noticeably.

Elsewhere, there was a change of sign for machine exports to China: from January to September, machine deliveries shrank by 0.7 per cent to €14.1bn. In the second quarter, exports were still up slightly by 0.1 per cent. China – the second most important single market for German machinery exporters – accounts for 10.5 per cent of the European country’s total machinery exports. “German machinery exports to the People's Republic are not immune to the weaker sales trend in mechanical engineering in China,” noted Dr Wiechers.

France: Europe's new growth engine

Meanwhile, France has become ‘Europe's new growth engine’, according to the VDMA. Currently number three in the export ranking, France gave important impetus to German machinery exports within the context of European customer countries. Exports grew by 6.9 per cent to €9.38bn in the first nine months of 2019. “The robust investment in France – in particular by French companies – at the beginning of this year, is directly reflected in German machinery exports to France,” said Dr Wiechers.

“The economy in France is growing faster than the Euro Zone, and much stronger than Germany. President Macron's tax and labour reform is bearing fruit,” he added. 

Exports to UK and Italy shrink amid uncertainty 

However, the opposite can be seen in the United Kingdom. The political tug-of-war over the modalities of the Brexit had a significant negative impact on export business with the UK from the second quarter of 2019 onwards. From January to September, German mechanical engineering exporters recorded an export decline of 4.8 per cent to €5.66bn. This contrasts starkly with Q1 figures, with the industry recording a growth of 8.8 per cent in exports to the UK.

Politics also left its mark on machinery exports to Italy. Exports shrank in the first nine months of the year by 5.4 per cent to €6.03bn. 

Total exports to the EU countries increased by 1.1 per cent to €64.6bn in the first nine months.

Positive developments in Russia and Japan 

Business with Turkey remained difficult, with exports declining by 7.7 per cent (to €2.36bn). Likewise, business with Russia shrank in the first nine months by 3.6 per cent (to €4.03bn), although machinery exports actually grew by 7.0 per cent in Q3 2019. 

Elsewhere, exports to Japan continued to develop positively, growing by an impressive 10.5 per cent to total €2.19bn over the first nine months of the year.