In the fourth quarter, mechanical and plant engineering companies in Germany recorded a decline in exports: according to preliminary calculations by the Federal Statistical Office, the nominal decline amounted to 4.2% compared to the previous year. The noticeable slowdown in export momentum over the course of the year thus continued. For 2023 as a whole, however, exports are still up 5.9% in nominal terms compared to 2022. The USA has replaced China as the most important export country, while exports within Europe are weakening.

VDMA Chief Economist Dr. Ralph Wiechers on the 2023 export balance: "With a total export volume of 207 billion euros, machinery and plant manufacturers from Germany once again achieved a new record last year. However, this growth is based exclusively on a strong first half of the year with double-digit growth rates. In the second half of 2023, the decline in incoming orders left its mark. Future success is therefore by no means assured and would urgently need political flank protection, for example through new free trade agreements."

China disappoints, USA inspires

German machinery exports in 2023 by region

© VDMA/Federal Statistical Office

The rise in export prices had a positive effect on companies. Adjusted for prices, machinery exports last year were just below the previous year's level (-0.7%). Dr. Wiechers: "A look at the latest foreign orders gives the impression of a bottoming out. However, I would not yet speak of a trend reversal. We can therefore expect exports to continue to decline in the coming months."

Demand from the USA, the largest single market for German machinery exporters, also weakened significantly towards the end of the year. In the fourth quarter, however, companies still recorded nominal export growth of 3%. For the year as a whole, machinery exports to the USA even saw double-digit nominal growth of 12.6%, reaching an export volume of 28 billion euros. The USA's share of total German machinery exports increased from 12.7% in 2022 to 13.5% in 2023.

"The main reason for the positive development of machinery exports to the USA was the robust US economy. In addition, the environment for investments in the manufacturing industry there is attractive - despite higher interest rates. Extensive stimulus measures led to a significant increase in construction investment, among other things. This ultimately led to an increase in demand for machines 'Made in Germany', which are not only required for the construction but also for equipping the new production facilities," Dr. Wiechers explains the development.

In contrast, business in China was disappointing for machinery exporters. In the final quarter, the decline was quite significant at a nominal 7%. Last year as a whole, machinery exports to China amounted to €18.6 billion, down 1.8% in nominal terms on the annual result for 2022. China's share of total German machinery exports therefore fell from 9.7% in 2022 to 9% in 2023.

"The high expectations following the expiry of the coronavirus measures in China have not been fulfilled. Instead, there is still weak demand, which is reflected in deflation, i.e. a fall in prices in Chinese industry, among other things. It is therefore not surprising that sales in the Chinese mechanical engineering sector have been virtually stagnating since 2021 according to official figures," analyzes the VDMA chief economist.

Welcoming culture important for competitiveness

Dr. Ralph Wiechers, VDMA Chief Economist

© VDMA

Machinery exports from Germany to the partner countries of the European Union also fell in the fourth quarter, by 9.1% in nominal terms. Nevertheless, the bottom line is that machinery exports to EU partner countries last year increased by 4.4% in nominal terms compared to the previous year, albeit at a below-average rate. With an export value of over 91 billion euros and a 44% share of total machinery exports from Germany, the EU internal market is by far the most important sales market for German companies.

"The high contribution of our EU partners to the export success of our mechanical engineering companies, but also as supplier countries, once again underlines the importance of the common market. This is another reason why a country as strong in exports as Germany needs open markets, a welcoming culture for foreign skilled workers and a firm anchoring in Europe and the eurozone," appeals Dr. Wiechers.

Machinery exports to France rose by 8.1% in nominal terms in 2023 compared to the previous year. By contrast, machinery exports to Italy only increased by 3% in nominal terms in the same period. Machinery exports to the Netherlands exceeded the previous year's result by 4.3% in nominal terms. Germany exported 11.5% more machines to Poland, while Austria recorded a decline of 4%.