The German Machine Tool Builders' Association (VDW) forecast a -3% year-over-year drop in its members’ manufacturing activity for 2024, down to €14.8 billion ($16 billion) based on slower order volume and a declining backlog of orders. "A nominal record volume of 17.0 billion euros was posted in 2018-2019, and five years later, there is still no sign of this figure being matched," stated Franz-Xaver Bernhard, chairman.
In addition to being the center of European manufacturing activity, Germany has the third-largest machine-tool manufacturing industry in the world, with 64% of its products exported to markets in Europe and worldwide.
While the forecast is negative, VDW reported its members increased their production volume nearly 8% to €15.2 billion ($16.5 billion) in 2023. Those values represented a 2% increase due to inflation.
German machine-tool exports grew by 9% for 2023, almost 70% of all output for VDW members.
The exports were boosted by double-digit growth in U.S. demand, according to VDW, whereas exports to Asian and European markets were up by single digits.
“The U.S. in particular saw extremely dynamic growth, driven above all by investment in climate protection and renewable energy,” according to a VDW summary. “China, by contrast, experienced weak growth due to falling consumer demand and the ongoing difficulties in the real estate sector. India, on the other hand, enjoyed sharp upward growth.”
The German Machine Tool Builders’ domestic sales increased 5% during 2023, though those member companies reported good capacity utilization and increased their employment totals by about 2.4% year over year.
However, VDW noted that its members have documented a -10% decline in new-order volume since the start of 2023, a trend that is impacting sales and production activities by machine tool manufacturers in Germany. Through the past year, production levels had been supported by the order backlog developed during the supply-chain complexities that prevailed during 2020-22. As the supply chain issues have been resolved there are fewer backlogged orders to uphold machine-tool production rates in the absence of increasing demand.
New orders from German machine-tool buyers fell by 14% during 2023, almost twice as much as foreign demand according to VDW, but the global economy is not expected to offer the demand necessary for machine-tool production increases in 2024.
Bernhard stated that the demand outlook involves “two divergent developments." Growth sectors like electric vehicles, wind power, medical technology, aerospace, and defense is propelling demand, while small and medium-sized customers (job shops) are uncertain about their futures and are reluctant to invest.
In addition, growth prospects are tempered by the difficulty for SMBs to finance purchases due to higher interest rates.