The VDMA conducted its 9th flash survey on the impact of the coronavirus pandemic on the mechanical and plant engineering sector; 575 member companies took part. The result: the industry has drawn a mixed balance for the past year. Four out of five companies closed the 2020 financial year with a decline in turnover. Nevertheless, the proportion of companies that managed to avoid a loss has risen from 13% to 21% since the end of September.

"Numerous machinery and plant manufacturers benefited from the economic upturn in the fourth quarter of last year and entered the new year with momentum. As a result, around one in six companies closed the financial year with an increase in turnover of between 0 and 10 percent," says Dr. Ralph Wiechers. "But even the companies with declining sales reported lower losses than feared last summer. Based on the 2020 sales figures now available, 42% of companies are reporting sales losses of between 10% and 30%. At the beginning of July 2020, 54% of companies were still expecting a drop in turnover of this magnitude," analyzes the VDMA chief economist.

Slow easing of the order situation

The order situation has gradually improved in recent months. Currently, 14% of companies still report a serious drop in orders; in September last year, this figure was twice as high. 39% of respondents report a noticeable drop in incoming orders, while 15% of companies no longer see themselves affected by order losses or cancellations, nine percentage points more than the comparable figure in September 2020.

Overall, companies are also slightly more optimistic about the development of the order situation over the next three months: 23% of companies expect the easing of demand to continue (September 2020: 20%). In contrast, 13% believe that the order situation will worsen in the coming months (September 2020: 17%). "The confidence among machinery and plant manufacturers in terms of demand is remarkable. After all, there are still high infection rates and lockdowns in many countries, which is causing a great deal of uncertainty," says Wiechers. "In addition, the survey took place after the last meeting of prime ministers with the German Chancellor. The survey participants were therefore aware of the decisions agreed there and the Minister of Labor's decree on working from home."

Travel restrictions remain a major concern

According to the survey, 88% of companies still see themselves affected by travel or residence restrictions. 79% of those surveyed consider the lack of predictability to be a problem. Last but not least, supply chains are also coming under pressure again. "Last fall, 10% of companies reported noticeable or serious disruptions in their supply chains. Now, at 20%, twice as many companies are reporting this," explains Wiechers.

Setbacks loom in the first quarter of 2021

The recent noticeable economic recovery has also had a positive effect on companies' capacity adjustments. 48% of companies are on short-time working and 47% are working with hiring freezes. In September last year, 64% of companies were still reporting short-time working and 62% had imposed hiring freezes. "The decline in short-time work should not obscure the fact that the situation on the labor market remains tense. Around one in five mechanical engineering companies - 22% - are currently reducing their workforce or plan to do so in the foreseeable future," emphasizes Wiechers.

Nevertheless, many companies are confident that they will be able to gradually overcome the consequences of the pandemic in 2021. Around three out of four companies expect sales growth. Almost every second company considers an increase of between 0% and 10% to be realistic. 43% of companies expect progress in the Chinese and North American sales markets in particular.

In the Chinese sales market, a further 14% of companies believe a significant improvement is possible. "By contrast, machine and plant manufacturers are less positive about developments on the European sales markets, including Germany. In Germany in particular, 65% do not expect any change for the better," explains the VDMA Chief Economist.

Situation remains unstable

"Even if the results of this flash survey are generally more positive than in fall 2020, this should not hide the fact that we have to expect setbacks, especially in the first quarter. In general, the situation in the mechanical engineering sector remains extremely unstable and tense this year. It is too early to sound the all-clear," Wiechers appeals to the collective bargaining partners in particular. The price-adjusted production level in 2021 is still likely to be around 10% below the already very low level of 2019, with an expected increase of 4% this year and an expected decrease of 14% last year. "For the majority of mechanical engineering companies, neither the utilization of physical capital nor that of the people working there will therefore be satisfactory."