GERMAN MACHINE TOOL ORDERS DOUBLE IN 3Q10

In the third quarter of 2010, order bookings in the German machine tool industry showed a continuously dynamic uptrend. With an increase of 117 percent, orders booked reflected three-figure growth for the first time ever since statistics have been kept. Sales continue to be driven by demand from abroad, which are up by 128 percent. Domestic order bookings rose by 99 percent, but most recently in September they drew level with export demand.

In the period from January to September 2010, overall demand was 77 percent up from the preceding year’s equivalent figure. Domestic customers ordered 69 percent more on a like-for-like basis, while the figure for customers abroad was 82 percent.

“The good news is this: the upturn is gaining in breadth. Production output in the major German customer industries is picking up speed,” reports Dr. Wilfried Schäfer, executive director of the VDW (German Machine Tool Builders Association) in Frankfurt am Main. But he warns against euphoria. “Gratified as we are by these impressive growth figures, the comparison with the preceding year is a misleading one. It is more realistic to draw a comparison with the results of 2008. Then, in the third quarter, we are actually down 20 percent on a like-for-like basis, and over the year as a whole we are actually down 40 percent.”

Capacity utilization continues to make huge upward strides. At 85.9 percent in October, it is once again close to the long-standing mean figure. Thanks to the flood of orders, existing production lines are being better utilized. In some cases, however, capacities are being downsized. The order backlog in June was 6.9 months. Companies are reporting bottlenecks for important outsourced components. At the end of this year’s third quarter, there were 64,300 people employed in the German machine tool sector. This signals a slow uptrend in comparison to the nadir reached earlier this summer.

“Against the background of these situational conditions and, above all, the unexpectedly high growth in orders, the VDW has revised its forecast upwards,” reports Schäfer. In August, he continued, sales had for the first time in two years entered the plus zone. Despite all the good progress made, though, this will not suffice for an actual rise in production output. But the decline will be only half as severe as originally anticipated. “Instead of a 12 percent decrease, we now predict a production decrease of only 6 percent,” announces Schäfer. At 9.3 billion euros, this means the sector will be roughly equal to the status of 2004.

The German machine tool industry is one of the five largest categories in the country’s mechanical engineering sector. It supplies production technology for metalworking applications in all branches of industry, and makes a crucial contribution to upgrading productivity in the industrial sector. Due to its absolutely key position for industrial production output, it is also an important indicator for the economic dynamism of the industrial sector as a whole. In 2009, the German machine tool industry employed just under 70,000 people (firms with more than 20 employees) and produced machines and services worth 10.2 billion euros. This corresponds to a slump in production output of 30 percent following an historic high in 2008.

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