"According to our latest VDMA flash survey from the beginning of September, 81% of mechanical engineering companies are now experiencing noticeable or serious disruptions in their supply chains. Shortages of electrotechnical and electronic components in particular have increased dramatically. In addition, almost two thirds of respondents are suffering from disruptions in logistics and transport processing. This is significantly more than even at the peak of the pandemic in mid-April 2020," says VDMA Chief Economist Dr. Ralph Wiechers.

Many companies are struggling with increasing material and supply bottlenecks, meaning that the VDMA expects production to grow by 5% in real terms in 2022.

© VDMA

The situation is not expected to ease, especially with regard to the supply of primary products, at least for the next three months. "40% of the mechanical engineering companies surveyed even expect problems to increase, while 52% expect the challenges to remain the same," explains Dr. Wiechers. Therefore, despite the good order situation, caution is still required with regard to the coming year: "The momentum in some countries is already slowing significantly, and the delta variant and lack of progress with vaccinations are weighing on economic activity in many countries. We therefore anticipate somewhat weaker production growth of 5% in real terms in 2022. Overall, however, the upturn should remain intact. In addition, everything that cannot be produced this year due to shortages will be implemented next year," predicts the VDMA chief economist.

High order growth in the current year

In the first seven months of the current year, the mechanical and plant engineering sector recorded a real increase in production of 7.1% compared to the previous year. Incoming orders increased even more strongly from January to July inclusive, rising by 30% compared to the previous year (Germany: plus 20%, abroad: plus 36%). According to VDMA economists, this will ensure continued high capacity utilization and production growth in the coming months.

For 2021 as a whole, the VDMA economists are sticking to their forecast of 10% growth. Although this would bring the industry a good deal closer to its 2019 production figure, hopes for even higher growth in the meantime are unlikely to be fulfilled. In some specialist sectors, especially among manufacturers of parts and components, as well as in Asia, there are initial signs of a slower pace of expansion. "Others are only now really gaining momentum, but are having to cut back on their production plans due to the numerous bottlenecks," Dr. Wiechers concludes.

Around 90% of companies in the German mechanical and plant engineering sector are expecting an increase in turnover for the current year.

© VDMA

This assessment is confirmed in the latest VDMA flash survey, in which almost 600 companies took part. According to the survey, nine out of ten companies are currently able to achieve less turnover than would be possible under other conditions due to production restrictions. This is also dampening sales expectations for the current year: just under half of mechanical engineering companies (44%) put the reduction in sales growth in 2021 as a result of material bottlenecks at 1 to 5 percentage points, with a further 28% even making a deduction of 5 to 10 percentage points. "Nevertheless, around 90% of companies are expecting an increase in turnover for the current year. However, the majority of companies will draw consequences from the difficult supply situation," emphasizes Dr. Wiechers.

According to the VDMA survey, more than 70% of companies are now planning to make changes to their supply chains. Above all, this means expanding the supplier network - also geographically -, increasing stock levels and looking for alternative supply routes.