The ongoing slump in the global economy is also leaving increasingly clear traces in the mechanical and plant engineering sector. Production in the first ten months of the current year was comparatively good thanks to high order backlogs and fewer bottlenecks in the supply chains. It achieved a real increase of 0.9% up to and including October. "However, after the first two quarters contributed to growth, machine production in the third quarter already fell short of the previous year's level by 1.6%. The fourth quarter will also be weak," said VDMA President Karl Haeusgen at the association's annual press conference in Frankfurt. "The good production up to the summer means that we are raising our estimate for 2023. We are now only expecting a decline in production of 1 percent in real terms. However, unlike a year ago, the declining order backlog is less and less able to support production. We are therefore adjusting our forecast for 2024 downwards: from minus 2 percent to minus 4 percent," explained Haeusgen.

Falling order backlog

This is because incoming orders in the mechanical and plant engineering sector have lagged behind the previous year month by month since the start of the year - by a total of 13% in real terms in the first ten months of 2023. This means that the order backlog is also shrinking. According to a recent VDMA survey (end of October), the order backlog in 60% of companies was already below their respective long-term average. "Despite the first tentative signs of a bottoming out, a real turnaround is not in sight for the time being," said the VDMA President. This is because investment activity could also slow down in the USA for economic reasons, while it is likely to remain weak in China. "Although we believe that countries such as India and Mexico will continue to grow, these markets are not big enough in themselves to compensate for declines in other markets," said Haeusgen.

Domestic expectations remain weak

Investment activity in Germany is also likely to remain weak for the time being. According to the results of an exclusive survey conducted by the IW for the VDMA, the economic outlook in Germany has deteriorated again and is back at the low level of autumn 2022. Investment expectations for 2024 have also deteriorated significantly. Here, the proportion of pessimists is currently 9 percentage points higher than that of optimists. "There are certainly investment incentives. According to the IW survey, the entire economy sees opportunities in the trends of digitalization/automation, building resilient supply chains and decarbonization. However, we do not assume that these expansive effects, which should also have an impact on the mechanical engineering sector, will be able to compensate for all negative factors in the coming year," said Haeusgen.

The association is very pleased that employment in domestic companies has increased slightly again in 2023 to just under 1.03 million people in the core workforce. The VDMA President described an industry-friendly, long-term reliable location policy in the EU and Germany as a decisive factor in boosting investment again. "However, a policy that wants to regulate and finance everything is running against the wall. It is high time to place more trust in the social market economy again, to push back regulation and bureaucracy, to give companies more freedom for their innovations and also to give individual citizens more freedom and responsibility again," demanded the VDMA President.