Outlook: German Industry Growth to Continue

The German machine tool sector remains optimistic, says the VDW, the German Machine Tool Builders’ Association. The branch forecasts a further 10% growth in production for 2008, following on the record year of 2007.

“Based on the data currently available, the outlook is unmistakably clear,” confirmed Carl Martin Welcker, chairman of the VDW, at the association’s annual press conference in Frankfurt. Companies are working all out, with orders in hand keeping them busy well into this year.

Investments in equipment should increase another 4% in 2008. Most of the machine tool industry’s major customers, however dynamic they have been, are planning to expand further. Finally, German machine tool builders are enjoying the benefit of the continuing disproportionately rapid growth of important foreign markets such as China, India, Russia, and Eastern Europe.

Last year was the fourth growth year in succession, all of them record setters. Production growth in 2007 was 16% (to €12.5 billion). Over the past four years, cumulative growth has been an impressive 37%.

Both exports and domestic investment activities were driving forces behind growth in 2007. The domestic market expanded by more than a quarter to €7.1 billion, with machine tool orders increasing by a third. And at an estimated €7.8 billion, with growth at 10%, exports again climbed to record levels.

The branch benefited especially from the fact that the home export market in Europe grew by one-fifth. But by far the most important market—as in the previous three years—was China, with a growth figure of 14% driven by the boom in automobile industry purchases.

By contrast, exports to the second most important German customer, the USA, slumped 18%, a clear sign of the effect the euro’s strength is having.

In 2007, international machine tool production increased by 8% on a euro basis, with total production valued at €51.9 billion, excluding parts and accessories. Germany ranked second internationally after Japan, with its stable 18% share of the world market effectively closing the gap between them somewhat.

In the international exports ranking, Germany defended its preeminence. On a euro basis, German exports rose by 12%, as compared with the second-place Japanese performance of 7% growth in exports.

Explaining the branch’s high ranking, the VDW chairman pointed out that “German suppliers are able to hold their own so well against international competition for several reasons: they have a clear technical lead, theirs is an exceptionally wide-ranging production, and, inspired by international competition and international customers alike, they are forever offering new, creative solutions.”

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