Jul 6, 2017

The industry body for Germany’s powerful machine tool sector recently tripled its growth forecast for 2017, saying stronger than expected demand at home and abroad was boosting production. Based on strong growth in production so far this year, the Mechanical Engineering Industry Association (VDMA) lifted its growth forecast from 1.0 to 3.0 per cent for the full 12 months.

“The mood among firms is markedly good. Everything is in place for a new upturn,” said VDMA chief economist Ralph Wiechers in a statement. Machine tool makers—making up Germany’s second-largest industrial sector after carmakers— booked 2.3 per cent growth in production between January and April compared with the same period in 2016.

The VDMA pointed to ‘significantly stronger than expected’ demand from euro zone neighbours, prospects for stronger growth at home in Germany as industrial firms grow more confident, and better-than-forecast business with customers in Asia, especially China. Machine tool exports from Germany to China grew by 15 per cent year-on-year in the first four months of the year, the organisation said.

But the VDMA also highlighted risks for Europe’s export powerhouse on the horizon from ‘current events in important customer countries’ such as the United States and Britain. US President Donald Trump has set his sights on Germany’s mammoth trade surplus, threatening punitive tariffs, while Britain’s departure from the European Union could throw up further barriers to trade.

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