April 2019 INDUSTRIAL POLICY DOSSIER
Industry Report Industrial production and trade in the individual industries
▪
We expect manufacturing output in Germany to stagnate in 2019. Weakening global trade, escalating trade disputes and uncertainty surrounding future relations between the United Kingdom and the European Union are all dragging on the export-oriented manufacturing sector.
▪
Industrial production worldwide increased by 3.1 percent year on year in 2018. Growth was slower above all in the advanced economies. Industrial production here went up by only 2.4 percent. Growth in emerging countries only fell slightly, down to 3.7 percent.
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Exports of German goods are set to grow only slightly in 2019. We expect exported goods and services to increase by 1.5 percent in real terms.
▪
Global trade increased by 3.3 percent in 2018. This was the second highest growth in the last seven years. The advanced economies increased their exports by 2.4 percent, while emerging countries registered a rise of 3.7 percent.
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Content Global industrial production .............................................................................................................. 3 Industrial production in advanced economies ....................................................................................... 4 Industrial production in emerging economies ........................................................................................ 5 United States ......................................................................................................................................... 6 China ..................................................................................................................................................... 7 Japan ..................................................................................................................................................... 8 South Korea........................................................................................................................................... 9 European Union .................................................................................................................................. 10 Germany .............................................................................................................................................. 12 France ................................................................................................................................................. 13 Italy ...................................................................................................................................................... 14 Spain ................................................................................................................................................... 15 United Kingdom ................................................................................................................................... 16 Global trade ......................................................................................................................................... 17 Industrial sectors in Germany ......................................................................................................... 19 Aluminium industry: production decreases in 2018 ............................................................................ 19 Automotive industry ............................................................................................................................. 20 Construction industry: growth set to continue on a high level in 2019 ................................................ 21 Building materials industry: growth set to continue ............................................................................. 21 Chemical industry: German chemical industry slows down ................................................................ 22 German electrical and electronics industry: moderate prospects for 2019 ......................................... 23 Foundry industry in advanced economic upturn ................................................................................. 24 Glass industry continues upward trend ............................................................................................... 25 Ceramics industry ................................................................................................................................ 26 Machinery production defies rough climate......................................................................................... 27 Nonferrous metal industry ................................................................................................................... 28 Situation of the steel industry in April 2019 ......................................................................................... 29 Steel and metal processing ................................................................................................................. 29 Textile and clothing industry ................................................................................................................ 30 Imprint ................................................................................................................................................ 32
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Global industrial production Global industrial production increased by three percent in 2018, according to figures from the CPB Netherlands Bureau for Economic Policy Analysis. Annual growth was thus slightly lower than the 3.4 percent growth registered the previous year. Industrialised economies accounted for as much as 0.3 percentage points of this loss in growth while the contribution to growth of developing countries over the same period decreased by only 0.1 percentage points. In the first two quarters of last year, production in emerging economies was still rising, going up by four percent and more. Activity then tailed off somewhat in the second half of the year. Growth in the fourth quarter 2018 was 3.2 percent. This led to an annual growth rate for these countries of 3.7 percent. Industrial production in advanced economies got off to a good start in 2018, growing 3.4 percent in the first quarter. The pace of growth then slacked off considerably throughout the rest of the year, going down to only 1.1 percent in the fourth quarter. The resulting annual growth rate of 2.4 percent, however, was still the second highest of the last eight years. The expansion of production is set to slow down further in 2019. In January, global industrial production was actually down slightly on December last year following seasonal and calendar adjustment. Year on year, growth was at 1.6 percent which is well below the average annual growth rate of last year. The course of the global purchasing managers’ index for manufacturing suggests a lateral movement. The first two figures for the year 2019 at 50.8 and 50.6 index points lie only marginally above the threshold between expansion and contraction.
World: Industrial production*, Purchasing Managers Index emerging economies advanced economies 5 Purchasing Managers Index seasonally adjusted (left axis)
55 54
4 53 3 52 51
2
50 1 49 0 48 47
-1 2014
2015
2016
2017
2018
2019
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis, own calculations
3
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Industrial production in advanced economies Growth only accelerating in the United States Among the advanced economies, the United States was the main contributor of growth in industrial production. In each of the first two quarters of 2018, U.S. industry increased its output by 3.4 percent year on year. In the second half of the year, the growth rate accelerated to bring the annual result for 2018 up to four percent. In the first quarter 2018, industry in the euro area matched the U.S. industry’s pace of growth. The other advanced economies even managed to keep pace well into the second quarter. But while the United States then stepped up the pace even further, all other regions lost steam substantially in the second half of the year. In the euro area, industrial production in the fourth quarter suffered its first dip in five years, resulting in an annual growth rate of 1.0 percent. Japan recorded a production increase of 0.9 percent. The remaining advanced economies increased industrial production by 2.5 percent, a slightly above average result. In January 2019 the rise in output in the advanced economies was markedly slower, with only one percent growth following seasonal and calendar adjustment compared to the same period last year. While industry grew in the US, it continued to decrease in the euro area. Production in Japan and the remaining advanced economies stagnated at the start of the year. In February 2019, the purchasing managers’ index for manufacturing fell to its lowest level since May 2016. This was also its tenth consecutive drop. At 50.4 index points, it is now hovering just above the threshold to expansion. At best, we expect industrial production to increase marginally in the current year.
Advanced economies: Industrial production*, Purchasing Managers Index other advanced economies restliche entw. Volkswirtschaften Euroraum Euro area Japan USA Purchasing Managers Index seasonally (linke adjusted (left axis) Einkaufsmanagerindex saisonbereinigt Achse)
57
5
56 4 55 3
54 53
2
52 1
51 50
0
49 -1 48 47
-2 2014
2015
2016
2017
2018
2019
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
4
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Industrial production in emerging economies Momentum slows in Asia; South America remains in recession Among emerging economies, it is the Asian countries, above all China, that are pushing the growth in industrial production in these countries. Yet this engine of growth lost a little steam in 2018. After expanding by six percent in the first quarter 2018, growth slowed continuously in the further course of the year, slipping to only five percent in the fourth quarter. Overall, annual growth was at 5.6 percent, which, though lower than the previous year, exceeded the growth levels of 2015 and 2016. Industrial production developed favourably in Africa and the Middle East. This region increased its production in 2018 by one percent, making it the fifth consecutive rise. In the Central and Eastern European countries, industrial production grew at a similar rate to the previous year, increasing by 2.8 percent. These two regions thus both contributed 0.2 percentage points to production growth in emerging economies. Developments in Latin America, on the other hand, are worrying. Industrial production in the region dropped for the fifth time in a row, this time going down by 2.1 percent and thus slightly more than the previous year. This pulled down the growth in industrial production for emerging economies as a whole by 0.4 percentage points. In January 2019 industrial production in emerging economies only increased by 2.2 percent year on year following seasonal and calendar adjustment. This corresponds to an increase of 0.2 percent compared to the previous month. In both the Asian emerging economies and the Central and Eastern European countries, industrial production expanded by slightly more than four percent year on year. Latin America, Africa and the Middle East, on the other hand, recorded substantial drops in production. In January 2019, the manufacturing purchasing managers’ index dropped to below 50 points for the first time since June 2016, before managing to climb back into expansionary territory in February 2019, with 50.6 points. Emerging economies: Industrial production*, Purchasing Managers Index Afrika/Mittlerer Osten Africa/Middle East Lateinamerika Latin America Zentralund Eastern Osteuropa Central and Europe Asien 5 Asia Purchasing Managers Index seasonally(linke adjusted (left axis) Einkaufsmanagerindex saisonbereinigt Achse)
53 52
4
51
3
50
2
49
1
48
0
47
-1
46
-2 2014
2015
2016
2017
2018
2019
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
5
Industry Report | Industrial production and trade in the individual industries 11/04/2019
United States U.S. industry (the figures of the CPB refer to industrial production excluding construction) has been growing for the past two years. Following growth of 1.6 percent in 2017, industry has considerably ramped up its activity. In each of the first two quarters of 2018 production grew by 3.4 percent year on year. In the third quarter, growth surged up to 5.1 percent, a rate last seen in 2010. This pushed the overall growth rate for the year up to four percent. Manufacturing increased its output at a much lower level of 2.3 percent in 2018, but this was the steepest increase since 2012. Among the individual industries in the manufacturing sector, machinery manufacturing, as in the previous year, recorded the highest growth. Following growth of 6.5 percent in 2017, production in 2018 increased by 5.4 percent. Vehicle manufacturing picked up again after a dip in production last year, going up by 3.8 percent. The food industry increased its production for the sixth year in a row, growing by 3.2 percent in 2018. The chemical industry performed better than in the last eight years, expanding by 3.1 percent. In combination with pharmaceuticals, the annual result was an even higher 3.4 percent. The performance of the electrical and electronics industry was slightly below average, going up by only two percent.
United States: Industrial production*, Purchasing Managers Index 60
5
58
4 3
56
2
54
1 52 0 50 -1 48
-2
46
-3
44
-4
42
-5 2014
2015
Industrieproduktion Achse) Industrial production(rechte (right axis)
2016
2017
2018
2019
Einkaufsmanagerindex saisonbereinigt Achse) Purchasing Managers Index, seasonally(linke adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
At the beginning of 2019, the U.S. industry has slightly slowed its pace of growth. Statistics for the United States industry put year on year growth of the manufacturing sector at 1.9 percent for the first two months of the current year. Mechanical engineering and the chemical industry both recorded strong increases in production at the start of the year. The electrical and electronics industry and the food industry both registered growth of slightly over one percent, while vehicle production stagnated.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
After rising in January, the purchasing managers’ index for manufacturing lost ground again in February and March, although at 52.5 points it is still in positive territory. In view of the slowdown in momentum, we now expect production to increase by only two percent in 2019 overall. Growth in industrial production excluding construction should be somewhat higher. China Chinese industry (manufacturing sector including construction) was able to edge up growth somewhat in spring 2018. After annualised growth rates of 6.1 and 6.3 percent at the turn of the year 2017/2018, growth rates were up to 6.5 percent in February and March 2018. After the first six months of 2018, Chinese industry was expanding at an annualised rate of 6.4 percent. The rate of growth then slowed down substantially in the second half of the year, tapering off from 6.5 percent in July 2018 to 5.7 percent in December 2018. At the start of 2019, production growth in manufacturing was slightly weaker. Figures for industry as a whole were not yet available in time for this report. The purchasing managers’ index for manufacturing rose for the third time in a row in March 2019. At 50.8 points, the index has re-entered expansionary territory for the first time this year and this value also marks the highest level recorded since July 2018.
China: Industrial production*, Purchasing Managers Index 52
8
51
7
50
6
49
5
48
4
47
3 2014
2015
Industrial production(rechte (right axis) Industrieproduktion Achse)
2016
2017
2018
2019
Einkaufsmanagerindex saisonbereinigt Achse) Purchasing Managers Index, seasonally(linke adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
7
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Japan For the third year running, Japan’s industry (production sector excluding construction) failed to match the previous year’s growth rate. Following a two percent increase in production in the first quarter 2018, growth was down to only 1.2 percent in the second quarter. In the second half of the year, growth was only just up year on year, nudging up 0.1 percent in the third and 0.5 percent in the fourth quarter. Overall, the growth rate for the year and that of the manufacturing sector was 0.9 percent. Among the individual industries of the manufacturing sector, it was the machinery manufacturers who again, as in 2017, registered the highest growth in production, going up by 5.6 percent in 2018. Activity in the chemical industry including the manufacture of pharmaceutical products also performed above average, growing by two percent. The chemical business on its own, however, managed just an average 0.9 percent. Vehicle production suffered a slight drop in production of 0.5 percent. The electrical and electronics industry has still not regained its footing. Production dropped for the eighth consecutive year but the decrease in 2018 at 1.1 percent was much less pronounced. At the start of 2019 output in the manufacturing sector registered another slight drop year on year, this time by 0.3 percent. Vehicle production and the chemical industry registered increases of 3.5 and 1.5 percent respectively. Activity in the electrical and electronics industry and in machinery manufacturing dropped substantially. In March 2019, the manufacturing purchasing managers’ index did not drop further but, at 48.9 points, is still below the expansionary threshold, thus making an increase in production in the first quarter 2019 highly unlikely. At best, we expect Japan’s industry to grow production by one percent this year.
Japan: Industrial production*, Purchasing Managers Index 60
8
58
6
56 4 54 52
2
50
0
48 -2 46 -4
44 42
-6 2014
2015
Industrieproduktion Achse) Industrial production(rechte (right axis)
2016
2017
2018
2019
Purchasing Managers Index, seasonally adjusted (left axis) Einkaufsmanagerindex saisonbereinigt (linke Achse)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
South Korea After seeing a decrease in production of 1.2 percent in the first quarter 2018, industrial production (excluding construction) in South Korea went up in the further course of the year. In the middle of the year, production expanded by 2.7 percent in the second and by 2.5 percent in the third quarter. Production continued to rise in the last quarter of the year. The resulting annual growth rate of 1.2 percent is, however, not even half as high as it was the previous year. South Korea’s manufacturing sector also recorded an increase in production of 1.2 percent in 2018. Among the main individual industries, chemicals was the only industry that managed to increase production (up 2.3 percent). In combination with the production of pharmaceutical products, the annual production increase was as much as 7.9 percent. Production in the electrical and electronics industry was down year on year by 0.2 percentage points. South Korea’s machinery manufacturers registered a decrease in production of 3.5 percent following hefty production increases last year. Vehicle production was down on the previous year for the third time in a row, this time by 1.2 percent. At the start of 2019, industrial activity in South Korea seems to be flagging. The two-month year-onyear comparison showed a drop in production for the first time in ten months. Machinery manufacturers recorded a hefty reduction of 13.4 percent. Reductions in the electrical and electronics industry and in the chemical industry were not compensated for by the good performance of pharmaceuticals and vehicle production. The purchasing managers’ index for manufacturing has been below the expansionary threshold since November 2018. But at least the PMI rose by 1.6 points in March 2019, reaching 48.8 points.
South Korea: Industrial production*, Purchasing Managers Index 53
6
4 51
2 49 0
47 -2
45
-4 2014
2015
Industrieproduktion Industrial production(rechte (right axis) Achse)
2016
2017
2018
2019
Einkaufsmanagerindex Purchasing Managers Index, saisonbereinigt seasonally(linke adjusted Achse) (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
European Union The momentum of industrial production (excluding construction) in the European Union dropped steadily throughout 2018. Following an increase of 3.2 percent in the first quarter, quarterly growth rates went down to one percent in the third quarter 2018. The fourth quarter even saw a decrease in production of 1.1 percent. Overall, industrial production in the EU increased by a total of 1.3 percent. After growing by 3.1 percent in 2017, this was already the fifth consecutive increase. Manufacturing even recorded growth of 1.6 percent in 2018. Among the individual industries of the manufacturing sector, production in machinery manufacturing recorded the highest growth, going up by 3.2 percent. The electrical and electronics industry came a close second, going up by 2.8 percent. The chemical industry recorded an above-average increase of 1.8 percent, thanks to unusually strong results from pharmaceuticals (up five percent). Production of basic chemicals actually dropped slightly. With annual growth at 1.4 percent, the year was slightly below average for the steel and metal processing sector. Vehicle production registered slight dips in growth following five years of continuous growth, partly on account of teething problems with the new WLTP procedure.
European Union: Industrial production*, Purchasing Managers Index 60
5 4
58 3 56 2 54
1 0
52 -1 50 -2 48
-3 2014
2015
Industrial production(rechte (right axis) Industrieproduktion Achse)
2016
2017
2018
2019
Purchasing Managers Index, seasonally(linke adjusted (left axis) Einkaufsmanagerindex saisonbereinigt Achse)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
10
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Industrial production in 2018 was weaker in all five economic heavyweights of the European Union than the average for the whole EU. The strongest growth among these countries was recorded by German industry with an increase of one percent. Industry in the United Kingdom and in Italy increased their production by 0.7 percent in both countries. France and Spain brought up the rear, both with a tiny plus of 0.4 percent.
Development of the industrial production* since 2015 108
Italy
106
Spain Germany 104
France United Kingdom
102
100
98
96 2015
2016
2017
2018
2019
*Production index: six-month average, after calendar and seasonal adjustments (2015=100) Source: Macrobond
We expect to see a similarly weak development of industrial activity this year as in 2018. In January 2019, industrial production dropped 0.6 percent year on year after seasonal and calendar adjustment. Compared to the previous month, however, production was up by one percent. In March 2019, the purchasing managers’ index for manufacturing decreased for the fourth time in a row. At 48.3 index points it is below the threshold of expansion for the second consecutive time.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Germany In Germany industrial production (excluding construction) grew robustly in the first half of 2018. Growth rates of 4.2 percent in the first and 2.8 percent in the second quarter suggested 2018 would be as strong as the previous year. In the second half of the year, however, economic momentum ebbed considerably, partially on account of one-time effects. The new testing procedure curbed growth in vehicle production, and the low water levels of the Rhine dampened production in industries dependent on this waterway. In the third quarter, production levels were slightly lower than the same quarter last year. By the fourth quarter, production had dropped to 2.4 percent lower than the previous year. This brought the result for the year 2018 down to only one percent. In manufacturing, the increase in production for 2018 was only slightly higher at 1.2 percent. Among the individual industries, machine manufacturing recorded an increase of 2.4 percent. The electrical and electronics industry achieved an above-average increase in production, going up by two percent. The annual result for the steel and metal processing industry at 1.1 percent was around the average for the industry. The strong increase in the chemical industry of 3.8 percent was a result of the steep increase in the production of pharmaceutical products. Basic chemical production itself decreased by 2.1 percent, performing worse than vehicle production which suffered a drop in production of 1.7 percent. At the start of 2019, economic momentum has continued to slow down. Output of industrial production (excluding construction) and the manufacturing sector in January was down by 3.4 and four percent respectively year on year. The purchasing managers’ index for manufacturing indicates decreasing production for the first three months of the current year. Based on individual industry estimates, we expect production to stagnate in 2019 overall.
Germany: Industrial production*, Purchasing Managers Index 8 63 6 58 4 2
53
0 48 -2 43
-4 2014
2015
Industrial production(rechte (right axis) Industrieproduktion Achse)
2016
2017
2018
2019
Einkaufsmanagerindex saisonbereinigt (linke Achse) Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
12
Industry Report | Industrial production and trade in the individual industries 11/04/2019
France In France, industrial production (excluding construction) was not able to maintain the high growth rate of the previous year. Following an increase of 2.6 percent in the first quarter (year on year), production in the second and third quarter was only slightly above the previous year’s levels, with an increase of 0.6 and 0.4 percent respectively. In the fourth quarter, production even decreased by 1.7 percent. Nonetheless, industrial output rose for the fourth consecutive year, although at 0.4 percent it was the smallest increase in this period. Among the individual industries, machinery engineering and the electrical and electronics industry grew for the second year running, both increasing production by 1.2 percent. The metal processing industry grew at a similar rate, increasing by one percent. Vehicle production expanded robustly until the middle of the year, but then production decreased in the second half of the year due to the new European emissions’ testing procedure. The previous year’s level of production was exceeded, though narrowly at 0.2 percent, for the fifth year in a row. Production of basic chemicals was down by 2.4 percent on the previous year. The chemical industry as a whole was only able to record a positive annual result on account of the 5.7 percent rise in the production of pharmaceutical products. At the beginning of 2019, the downward trend of France’s industry has flattened out. In January, the index for industrial production excluding construction increased both compared to the previous month and compared to the same period last year. The manufacturing sector also showed more momentum. The purchasing managers’ index for the manufacturing sector even rose slightly above the expansionary threshold of 50 points in the first two months of the year, though it lost ground slightly again in March. France: Industrial production*, Purchasing Managers Index 59
6 5
57
4 55 3 53
2
51
1 0
49 -1 47
-2
45
-3 2014
2015
Industrieproduktion Achse) Industrial production(rechte (right axis)
2016
2017
2018
2019
Einkaufsmanagerindex saisonbereinigt (linke Achse) Purchasing Managers Index, seasonally adjusted left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
13
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Italy Italy’s industry has been growing for the past four years, though last year, the pace of growth slowed down considerably. Following an increase of 3.4 percent in the first quarter, production only increased by 1.9 percent in the second. In the second half of the year, production restrictions curbed performance in vehicle production. In the third quarter 2018 industrial production (excluding construction) only decreased by 0.2 percent and in the fourth quarter by 2.4 percent. In 2018 overall, industrial production thus increased by 0.7 percent. Among the individual industries of the manufacturing sector, machinery manufacturers recorded the highest growth rate, increasing their output by 3.7 percent. This is the fourth consecutive year of growth for Italy’s machinery manufacturers. This is also true for the electrical and electronics industry, which increased production by 1.3 percent. The chemical industry also increased its production by 1.3 percent, thanks to the robust increase in the production of pharmaceutical products. Production of basic chemicals only increased by 0.4 percent. The metal processing industry did not perform as well as the manufacturing sector as a whole, going up by only 0.9 percent. For the first time in four years, vehicle production recorded negative growth. The increase in production was already very low in the first half of the year. In the second half of the year production dropped substantially, as in other EU countries. Production in the industry was down by 3.3 percent. The downward trend has continued into the beginning of 2019. In January 2019, industrial production excluding construction was down year on year as was manufacturing output. The purchasing managers’ index for manufacturing has remained below the expansionary threshold for the past six consecutive months. In February and March, the index dropped to its lowest value in seven years.
Italy: Industrial production*, Purchasing Managers Index 60
8
58
6
56 4 54 2 52 0 50 -2
48 46
-4 2014
2015
Industrial production(rechte (right axis) Industrieproduktion Achse)
2016
2017
2018
2019
Einkaufsmanagerindex saisonbereinigt Achse) Purchasing Managers Index, seasonally(linke adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Spain Spain’s industry has been growing for the past five years. The rate of expansion decreased considerably in the course of the year 2018. Following an increase of 2.7 percent, industrial production (excluding construction) dropped down to 1.4 and 0.5 percent in the second and third quarters respectively. In the fourth quarter 2018, the drop in production was substantial at 2.8 percent. Production was down not only in vehicle production but also in the metal processing industry. For 2018 overall, the increase in industrial production was only 0.4 percent. Within the manufacturing sector, production in the electrical and electronics industry increased the most, going up by 5.1 percent. The machinery manufacturing industry recorded the second highest growth, going up by 3.5 percent after double digit growth in 2017. The production of basic chemicals rounded off the year with an increase of 0.8 percent. In conjunction with pharmaceuticals, production increased by 1.1 percent. Production in the metal processing industry increased on a similar scale. Vehicle production dropped for the second consecutive year, this time by 1.6 percent. Following a weak end to the year 2018, the situation brightened up somewhat in January 2019. Manufacturing showed an increase in production of 0.7 percent compared to the same period last year. Compared to the previous month, production also increased. Industrial production excluding construction even increased by 2.5 percent. The purchasing managers’ index for manufacturing increased to 52.4 points in January, reflecting the increase in production in January. In February, the index dropped 2.5 points, falling briefly below the expansionary threshold before crossing it again in March with 50.9 points.
Spain: Industrial production*, Purchasing Managers Index 58
6
56
4
54 2 52 0 50 -2 48 -4
46 44
-6 2014
2015
Industrial production (right axis)
2016
2017
2018
2019
Purchasing Managers Index, seasonally adjusted (left axis)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
United Kingdom In the United Kingdom, industrial production (excluding construction) only increased by 0.7 percent compared to the previous year. This means that the pace of growth dropped by more than 50 percent compared to the previous year. Although the UK industry started off 2018 with an increase in production of two percent, activity decreased substantially in the further course of the year. In the fourth quarter 2018, production was down by one percent. In the manufacturing sector, the rise in production for the year 2018 overall was only slightly higher at 0.9 percent. Among the main individual industries, the electrical and electronics industry recorded its best result in 17 years, surging up by 7.1 percent. Machinery manufacturers were not able to maintain the pace of growth of the previous year but still managed an above-average increase of 1.7 percent. The chemical industry expanded by 1.4 percent, thanks to the good performance of pharmaceuticals. The production of basic chemicals was only 0.4 percent higher than last year. Vehicle production finished off the year with a decrease of 1.8 percent. The metal processing industry saw a drop in production of 0.5 percent. At the beginning of 2019, industrial activity in the United Kingdom has lost further momentum. Industrial production as a whole decreased in January compared to the same month last year. Production was also down in the manufacturing sector. The purchasing managers’ index for manufacturing dropped in the first two months of the current year but, at 52 points, still indicated expansion. In March, the index turned around, jumping to its highest level in 13 months.
United Kingdom: Industrial production*, Purchasing Managers Index 60
6
58 4 56
54
2
52 0 50
48
-2 2014
2015
Industrieproduktion Achse) Industrial production(rechte (right axis)
2016
2017
2018
2019
Purchasing Managers Index, seasonally(linke adjusted (left axis) Einkaufsmanagerindex saisonbereinigt Achse)
*Production index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
16
Industry Report | Industrial production and trade in the individual industries 11/04/2019
Global trade Second highest growth within the last seven years Global trade activity was slightly weaker in 2018 than in the previous year. According to the CPB Netherlands Bureau for Economic Policy Analysis, the global trade volume increased by 3.3 percent in 2018 compared to 2017. Following an increase of 4.3 percent in the first quarter 2018, the rate of growth slowed slightly in the middle of the year. In the fourth quarter, the trade volume actually dropped compared to the previous quarter. A year-on-year comparison shows a considerably more moderate increase of 1.4 percent. Emerging economies exported 3.7 percent more goods in 2018 overall than in the previous year. Among the individual groups of countries, the Asian emerging economies upped their exports most, with an increase of 4.3 percent. Latin America exported 3.6 percent more goods. Unlike in the previous two years, exports from the Central and Eastern European economies grew less than average, rising by only three percent. Exports to Africa and the Middle East increased by one percent following a drop in 2017. Exports from the advanced economies only started to tail off in the second half of the year. Following an increase of more than three percent in the first two quarters, growth dropped to 2.4 percent in the third and 0.5 percent in the fourth quarter 2018. The annual growth rate is thus 2.4 percent which is still the second highest increase in the last seven years. The United States recorded the highest increase in exports, going up by 4.1 percent. Exports from Japan rose 2.6 percent, thus showing aboveaverage growth as did exports from the remaining advanced economies (up 2.7 percent). The euro area only managed to increase exports by 1.6 percent.
World: Exports according to region of origin entwickelte Volkswirtschaften advanced economies
6
emerging economies Schwellenländer
5 4 3 2 1 0 -1 -2 2014
2015
2016
2017
2018
Index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Development of German exports In the first quarter 2018 German exports recorded a solid increase of 4.5 percent compared to the same period the previous year. In the following quarter, exports expanded by four percent. In the second half of the year this trend flattened out considerably leading to an overall increase in exports for 2018 of 3.2 percent compared to the previous year following seasonal and calendar adjustment. In terms of destination, exports to the euro area recorded the strongest growth, going up by 4.6 percent. While only accounting for one third of total exports, these accounted for half of the growth in exports. Exports to the remaining member states of the EU only increased by a below-average 2.8 percent. Exports to the United States also increased less than average, going up by only 1.6 percent. Exports to Asia increased by 4.1 percent, following an increase of seven percent the previous year. Exports to the remaining countries only increased by 0.2 percent. In January 2019 exports only increased moderately, going up by 1.7 percent. An above-average volume of exports was exported to countries outside the European Union (up 3.3 percent). Exports to the euro area increased below average, going up by only one percent. Demand from the remaining EU countries even stagnated. For 2019 overall, we expect German exports of goods to increase by just under one percent. Including the trade in goods and services exports, we expect exports to increase by 1.5 percent in real terms.
Germany: Exports according to region of destination
remaining countries restliche Länder Asia Asien
12
USA Nicht Euroraum Non Euro area Euroraum Euro area
10 8 6 4 2 0 -2 -4 2014
2015
2016
2017
2018
Index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Industrial sectors in Germany Aluminium industry: production decreases in 2018 In 2018, Germany produced around 1,291,000 tonnes of raw aluminium, which is 1.7 percent less than in 2017. Of the aluminium produced, 761,700 tonnes were recycled aluminium and 529,000 tonnes primary aluminium. While levels of recycled aluminium remained virtually stable, primary aluminium was down by 3.8 percent. The proportion of recycled aluminium increased by one percentage point over the previous year. The production of semi-finished aluminium products (rolled products, extruded products, conductors and wires) dipped minimally in 2018, going down 0.3 percent to 2,459,000 tonnes. The industry supplies all major industrial sectors and the construction industry. Sales to machinery manufacturing and the electrical and electronics industry recorded particularly strong growth. The largest customer group of German semi-finished rolled aluminium goods in terms of volume are aluminium rolling mills. The production of rolled products made of aluminium in 2018 overall amounted to 1,855,000 tonnes. This represents a decrease of 0.3 percent compared to the previous year. The producers of extruded products reported a decline in production of 0.9 percent (579,000 tonnes). Aluminium processing companies in Germany produced a total of 340,000 tonnes in 2018. This corresponds to a decrease of two percent over the previous year. These companies produce foil, thin ribbon, tubes, aerosols and other cans as well as metal powder. The main buyer for aluminium processing is the packaging sector. All in all, the German aluminium industry displayed a slight downward trend in 2018. Slight rise in exports In 2018, exports were a mainstay for companies in the German aluminium industry. This was particularly true for the producers of rolled aluminium goods. Exports in this segment increased by 0.8 percent overall, with exports destined for North America (up 12.3 percent) and Central and South America (up 8.6 percent) recording very high growth. Exports to the EU28 also increased, going up by 2.7 percent. Risks remain high In 2018, the risks facing the aluminium industry were already high and included possible bottlenecks in the supply of raw materials, the imposition of import duties by the United States on certain aluminium products and growing competition from abroad. 2019 is not set to be an easier year for the industry with Brexit looming, trade disputes continuing, economic growth flattening out, the possible imposition of punitive duties on cars, slowing growth in China, and other factors. Although companies in the sector are still optimistic about their current situation (first quarter 2019), prospects for the next six months have deteriorated and are slightly negative.
Contact: Dr. Andreas Postler / Phone: +49 211 4796 118 / Mail: andreas.postler@aluinfo.de
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Automotive industry Production Judging by the first quarter performance, 2019 is going to be another challenging year for the automotive industry. The production of passenger cars dropped by eleven percent, down to 1,264,000. Numerous factors have triggered the weak start to the year. Alongside the overall economic environment, which has been worsening for months, the automotive industry is trending towards consolidation in most regions. New passenger car registrations in Europe this year so far are down by four percent. Exports decreased, both to the world’s biggest automotive market, China, diving 17 percent, and to the United States by two percent. As well as faltering demand, locational factors are also playing a large role. While production in Germany decreased in the first two months of the year, production in facilities in other European countries increased by five percent, going up to 699,000 passenger cars. On account of its cost structure, Germany struggles to maintain competitiveness against other European countries. Labour costs in the German automotive industry in 2018 climbed to 54 euros per working hour, which is a new record for Europe, well above Sweden, the country with the second highest labour costs in Europe, at 44 euros per hour. German carmakers are increasingly producing new, attractive passenger car models outside Germany. While overall production numbers remain relatively constant, the production of cars is gradually shifting abroad. Another reason behind the decrease in production are the statistics used to measure performance. The number of passenger cars reflects neither improvements in quality, nor shifts between the different segments, nor the rising proportion of premium models. The trend towards higher-priced four-wheel drives and SUVs, for example, is not represented by simply looking at the overall number of cars produced. The trend towards superior fittings in the new cars, alone the wide range of assistance systems, is not reflected by the overall production numbers either. This methodological aspect explains why the production index, which dropped by three percent, and the production of passenger cars, which dropped by nine percent, down to 5.12 million units, have gradually diverged. Another factor playing into this equation is the buoyant market for commercial vehicles. The demand for vans, in particular, shows no signs of abating with online trade continuing to flourish. The Western European market for vans is now only slightly below its record years of 2007/2008. Demand for heavy-duty vehicles is also booming on the back of the economic growth of the last few years and the resulting rise in the transport of goods. The move away from diesel vehicles to petrol vehicles has not become more pronounced, according to the latest figures available. In February, the proportion of diesel vehicles was slightly above last year’s level of 35 percent. At the same time, the proportion of petrol vehicles remained practically constant at 61 percent. As in the previous year, electric vehicles account for a good three percent (including plug-ins). Other types of engines are currently insignificant. Exports The export of passenger cars continues to be a key pillar of the German automotive industry. The proportion of exports rose slightly in the first quarter, up to 77 percent. The biggest market for German car exports is still the United Kingdom. In the first two months of the year, more than every fifth car exported by Germany, 135,000 passenger cars in total (down five percent) went to this country.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Although Brexit has not yet taken place, German car exports to the United Kingdom have already fallen by 18 percent since 2016. Passenger car exports increased both to the United States (up 14 percent to 76,000) and to China (up eight percent to 46,000).
Contact: Alexander Fritz / Phone: +49 30 8978 423 33 / Mail: alexander.fritz@vda.de
Construction industry: growth set to continue on a high level in 2019 In 2018, construction industry revenue increased by 11.3 percent in nominal terms. Despite the high rise in prices of around 5.6 percent – mainly caused by the recent, hefty increase in building material prices, and a 5.7 percent rise in agreed wages, output in real terms was still up by 5.4 percent. In view of the constant complaints of production bottlenecks in the construction industry, this is a very strong performance. It’s all go for the construction industry this year as well. Construction companies with 20 or more employees closed off 2018 with a record volume of orders in hand of 46 billion euros, which will keep companies in this category busy for around seven months. Meanwhile, the positive environment for the construction industry is not likely to change much despite the external economic turbulences. Increasing worker numbers and the anticipation of wage increases around the three-percent mark will appreciably raise disposable income, investments at the federal, state and municipal level are maintaining their high level of investment, the ECB has refrained from initiating the turnaround in interest rates for the time being, and the propensity of companies to invest remains high – apart from those in export-oriented industries. The Central Federation of the German Construction Industry (HDB) thus expects construction industry revenue to increase in 2019 by six percent in nominal terms and one percent in real terms. As in the previous year, there are unlikely to be any large divergences between the individual sectors of the construction industry with growth taking place on a broad and stable basis. The construction industry is once again proving to be a major contributor to overall economic activity. This also applies to the labour market. In 2018, the number of workers in the industry increased on average by 25,000 or 3.1 percent. For the current year, the HDB expects the workforce to grow by another 18,000 workers to total 855,000. Compared to the lowest workforce numbers of 2009, this represents an increase of 150,000 workers or 21 percent. As the German labour market has long been stripped bare, the construction industry has turned to the European labour market for many years now. Foreign workers now account for 18 percent of the construction workforce.
Contact: Heinrich Weitz / Phone: +49 30 2128 6144 / Mail: heinrich.weitz@bauindustrie.de
Building materials industry: growth set to continue The building materials industry is expected to continue growing at a moderate pace in 2019, despite the overall economic slowdown and a dip in the production index for January of 0.3 percent in real
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
terms. Cause for this optimism is the persistently buoyant activity of the construction industry, although, as capacity utilisation is already at a very high level here, further potential for growth is likely to be limited. The German Building Materials Association (bbs) anticipates moderate growth of production of shell and finishing work materials (such as cement, concrete, masonry products, plaster products, roof tiles). Building materials that are primarily required by other industries (such as refractory products for hightemperature combustion processes) is – in line with the subdued outlook for large swathes of the manufacturing sector – likely to experience stagnant or slightly decreasing demand in 2019. This positive outlook is supported by the current trend of the ifo business sentiment index for the manufacture of non-metallic mineral products, which rates current business, at just over 50 points, as very positive indeed. Business prospects have been somewhat affected by the overall deterioration in economic sentiment. Companies in building materials have now become slightly pessimistic about their future prospects, which went down 2.2 points. In 2018, the building materials industry managed to increase its output by 0.8 percent after price adjustment. The fourth quarter was particularly strong and pulled the annual result up into positive territory. The upward trend in the building materials industry was substantially weaker than in the construction industry, which is the key buyer of building materials. One of the reasons prompting this lower growth is that the use of building materials is decreasing in individual segments. Civil engineering, for instance, is increasingly focussed on maintenance measures that require less building materials. In view of the overall positive prospects for the current year, the workforce in the building materials industry is expected to rise further, following an increase of around two percent already in 2018. The bbs is also optimistic about the overall development of investment levels. Exports, which is of secondary importance to the industry as a whole, is set to grow on a similar scale to the moderate growth seen in 2018 (up two percent in nominal terms). Regarding production for the current year, the bbs is forecasting the moderate pace of growth to continue. As things stand, production should rise by around one percent following price adjustment.
Contact: Christian Engelke / Phone: +49 30 7261 999 29 / Mail: c.engelke@bvbaustoffe.de
Chemical industry: German chemical industry slows down All in all, 2018 was a positive year for the German chemical and pharmaceutical industry. All indicators clocked in well above 2017 levels, which were very high already. The industry’s revenue increased by more than four percent, climbing to 203.5 billion euros. Production rose by 3.6 percent year on year, while chemical prices increased two percent. But there are clouds in the sky. The positive performance was largely the result of a special effect in pharmaceuticals, which triggered a large increase in production and sales up to the third quarter. Chemicals (excluding pharmaceuticals) only exhibited growth in the first six months, going down 2.2 percent in the year overall. The last quarter of the year was particularly sobering. Almost all indicators pointed down. The sentiment in the industry reacted accordingly, falling substantially towards the end of the year.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
At the beginning of 2019, production levels recovered from their lowest point in November and rose compared to the previous months. However, production is still far below last year’s level. Producer prices for chemical and pharmaceutical products increased at the beginning of the year. Revenue was also up month on month but also still well below the previous year’s level. Outlook: business getting more difficult Business prospects have become slightly more pessimistic at last count. Industry in Germany and Europe is in a downturn. Major customer industries are curbing their production. Momentum in the automotive industry, which is important for the industry, is still subdued and this is having a detrimental effect on the upstream stages of the value chain. The economic policy environment in the EU is also cause for concern. The debt crisis in Europe is flaring up again, as demonstrated by Italy. Brexit is already having a negative impact on investment and trade even though the final decisions have not yet been made. Momentum is not expected to increase from outside of the EU either. The economy is losing steam around the world. The further escalation of trade disputes is curbing the U.S. economy. China is also growing much slower than it has in the past. Even if the trade disputes with the United States do not escalate further, the lower pace of growth of the People’s Republic of China is also keeping the lid on growth in other Asian countries. In this context, the German Chemical Industry Association (VCI) is expecting production for 2019 overall to decline by 3.5 percent. This may seem like a large drop but is slightly distorted by the unusually high level of production in 2018. Factoring out this unusual rise, production would stagnate in 2019. Prices for chemicals will increase by one percent due to the slight upward trend in commodity prices. The industry’s revenue is thus likely to come in 2.5 percent below the previous year’s level and amount to 198.5 billion euros. On account of the special effect within pharmaceuticals, it is worth looking at the chemical industry without pharmaceuticals. The production of chemicals is expected to decrease by 1.5 percent in 2019. Factoring in slightly higher prices, the revenue in chemicals will drop by 0.5 percent. Foreign trade should outperform domestic trade slightly.
Contact: Christiane Kellermann / Phone: +49 69 2556 1585 / Mail: ckellermann@vci.de
German electrical and electronics industry: moderate prospects for 2019 Price-adjusted production in the German electrical and electronics industry increased by 2.1 percent in 2018. Nominal revenue rose by one percent to 193.5 billion euros. While domestic revenue wellnigh stagnated, with a marginal uptick of 0.2 percent up to 91.8 billion euros, foreign revenue rose 1.7 percent to 101.7 billion euros. Sales to customers from the euro area (up 2.3 percent) slightly outstripped sales to third countries (up 1.4 percent). The electrical and electronics industry received marginally less orders in 2018 (down 0.2 percent), with a substantial reduction in large orders as well. Domestic orders dropped by 2.3 percent in 2018, while orders from abroad grew by 1.5 percent, Orders from the euro area and from third countries rose on a similar scale, going up 1.6 percent and 1.5 percent respectively.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Capacity utilisation in the industry remained high at the start of the first quarter 2019. It is currently at 87.6 percent of full capacity. The latest figures also show a substantial increase in the reach of orders in hand, which is currently at 3.8 production months. The workforce of the German electrical and electronics industry continued to grow last year, closing off the year with 890,000 workers – the highest number since spring 1996. The industry created over 22,000 new jobs in 2018. The business climate in the German electrical and electronics industry clouded over considerably in March 2019. It has now reached its lowest level since November 2014. Companies have become tangibly less optimistic about both their current situation and business prospects for the next six months. Although the current situation is still seen as positive, general business prospects have turned negative. For 2019, the German Electrical and Electronic Manufacturers’ Association (ZVEI) expects to see moderate growth in price-adjusted production of one percent and a similar growth in nominal revenue. Electrical and electronic exports: 2018 fifth consecutive record-breaking year German electrical and electronic exports increased by five percent last year, totalling 211.9 billion euros. While this result was the fifth record high in a row, growth was only half that of 2017 (up 10.8 percent). The top destination of German electrical and electronics exports last year was once again China. Exports to China increased by 10.3 percent to 21.0 billion euros. The second largest buyer, which was once again the United States, received German electrical and electronic exports worth 17.8 billion euros (up 4.3 percent). The difference in the level of exports to the two countries has now widened to more than three billion euros. Back in 2016, exports to both countries were practically equal. Exports to France, the third largest buyer, rose by 2.6 percent to 13.7 billion euros. The export prospects for German electrical and electronics companies have not shown a clear pattern in the last few months but remain positive overall.
Contact: Jochen Schäfer / Phone: +49 69 6302 332 / Mail: schaeferj@zvei.org
Foundry industry in advanced economic upturn Sentiment among German foundries at the end of March 2019 was divided. Following the recordbreaking (and overheated) level reached in summer 2018, companies in the industry now rate current business with considerably less enthusiasm. It is still, on balance, at plus 27 percentage points. Most of the segments of machine manufacturing with a high level of casting components have passed their peak. As these segments typically have long lead times and high orders in hand, the foundries are feeling the slowdown and anticipating a rather quieter second half of 2019. The current trend in the industry’s key customer group, road vehicle manufacturing, is more difficult to pin down. The automotive industry is still dealing with the fallout caused by WLTP. In addition, call-offs continue to be volatile. With more stringent vehicle registration requirements taking effect as of September 2019, pressure is set to grow in the second half of the year.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
In 2018 overall, the production of cast components increased by just under three percent. Figures available for the beginning of 2019 do not reveal a clear trend as extensive revisions by the Federal Statistical Office are still pending. The 600-odd companies operating in the industry currently employ around 80,000 workers according to a survey by its trade association BDG. New hires were only made with caution and where strictly necessary (up 1.4 percent). Prospects for the next six months have deteriorated due to the uncertainty surrounding the trade disputes and the lack of clarity on Brexit (as of March 2018). For 2019 as a whole, there are only limited opportunities for the production of casting components to reach the level attained in 2018. Export prospects for casting components basically positive In 2018, the revenue of the foundry industry increased by over three percent to 13.6 billion euros. Foreign sales were much less buoyant, growing by just over one percent (approx. 4.5 billion euros). Sales to customers outside the euro area only just exceeded the previous year’s level. Exports to the euro area and domestic sales were correspondingly more brisk. The proportion of exports slipped marginally to a good 33 percent. Export prospects as of March 2019 have visibly quietened down in response to signs of foreign customer markets weakening. Only five percent of companies surveyed expect exports to pick up. Over two thirds are preparing for production to stabilise at the current level. It should be noted here that around 80 percent of cast components produced in Germany are end-used abroad. Indirect exports via the German automotive and machinery industries are therefore a powerful influencing factor. The trend towards relocation in the OEM sector and the continuing trade tensions are continue to limit growth.
Contact: Heiko Lickfett / Phone: +49 211 6871 214 / Mail: heiko.lickfett@bdguss.de
Glass industry continues upward trend The glass industry recorded a positive performance in 2018. According to preliminary figures from the Federal Statistical Office, industry revenue was up 2.2 percent on last year. Good news, in particular, is that the number of workers increased by 3.9 percent to around 55,800. Total revenue for the glass industry in Germany rose by 2.2 percent to around 9.88 billion euros (2017: 9.66 billion euros). Domestic revenue increased moderately by 1.2 percent, while foreign revenue grew by 3.5 percent, slightly lower than the previous year. Momentum came mainly from countries outside the euro area, which accounted for six percent of foreign sales, while sales within the euro area only contributed 1.1 percent to growth. The upward trend in foreign revenue for the whole industry is also reflected in the industry’s external trade figures. Trade with glass and glass products in 2018 generated an export surplus of around 1.3 million tonnes, or around 1.4 billion euros, according to preliminary figures from the Federal Statistical Office. Exports thus increased by around eleven percent in tonnage and around six percent in value. Imports also increased around two percent in terms of tonnage and around one percent in terms of value.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
A look at the performance of the individual segments of the industry in 2018 shows a largely homogenous picture. Flat glass producers had a strong first six months then managed to maintain the level throughout the second half, closing off the year with an increase of five percent. Revenue generated by this segment amounted to 1.06 billion euros (2017: one billion euros). Flat glass refiners recorded a positive result of 3.89 billion euros (2017: 3.83 billion euros) which is an increase of 1.3 percent. The special glass segment also recorded growth. Total sales in special glass amounted to 1.54 billion euros, 5.5 percent higher than the previous year (2017: 1.46 billion euros). Fibreglass producers registered a slight minus with total revenue edging down 0.4 percent to 968 million euros (2017: 972 million euros). The hollow glassware industry remains stable. This industry consists of the sub-segments container glassware and tableware. Following a very successful first six months of the year in 2018, mainly due to a strong performance in tableware, the industry closed off the year with overall growth at 1.8 percent and revenue of 2.44 billion euros (2017: 2.39 billion euros). Starting off from this very high level, the glass industry had a slightly subdued start to the year, although prospects brightened considerably in March with the ifo business climate index rising from 27.2 to 33.1 points, its highest level since September 2018. Overall, the situation for the glass industry remains very stable and positive. Cause for concern is still the greatly increased energy and emission trading allowance prices, which could jeopardise the competitiveness of the energy-intensive glass industry.
Contact: Dr. Johann Overath / Phone: +49 211 4796 134 / Mail: overath@bvglas.de
Ceramics industry The fine ceramics industry rounded off the year with an increase in revenue of 4.7 percent. As in last few years, revenue was buoyed by the brisk momentum in technical ceramics. Technical ceramics stepped up its revenue by 8.5 percent, continuing its upward flight of the past few years. However, levels of growth within the subsegments of technical ceramics is very mixed. While segments such as medical ceramics is booming, others had a more muted year. Sales of technical ceramics were up both at home and abroad. The order books are still well filled, although the first ripples of the global slowdown are starting to reach the industry with the latest figures on incoming orders showing a slight decrease. 2019 is nonetheless set to be a good year for technical ceramics. Dinnerware and decorative ceramics had a rather difficult year in 2018. Despite the solid growth of the German economy and high private spending, consumer goods producers in this subsector failed to benefit from the favourable economic environment. Total sales dropped by 4.4 percent. Demand from abroad was also down on the previous year. Orders did start to pick up towards the end of the year paving the way for a good start to the new year. As things stand, it is unfortunately not possible to foresee whether this upward trend can be upheld over the next few months. Traditional manufactories managed to push sales slightly, nudging up revenue by 0.4 percent. Domestic revenue was particularly strong. Foreign markets were on the weak side and have not yet
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
regained their full potential. Orders in hand are currently on a good level, although the market is prone to change quickly especially for manufactories. The positive impetus within the individual subsectors at the beginning of 2019 should be viewed with caution on account of the multitude of economic, trade policy and structural risks. A hard Brexit that would see the introduction of import taxes and rising bureaucracy is just as likely as a further escalation in the global trade disputes. Dinnerware producers are also still struggling with changing consumer patterns. The persistent downward trend in shoppers coming to stationary retailers is a fairly significant risk that threatens to pull down sales.
Contact: Philipp Pickelmann / Phone: +49 9287 808 25 / Mail: pickelmann@keramverband.de
Machinery production defies rough climate Last year, the production of machinery and plants increased by 2.1 percent over 2017 after price adjustment. Growth was thus well below the five percent forecast. It was not the lack of orders keeping production of new machinery down but bottlenecks in production. In October 2018, ten percent of companies said insufficient technical capabilities were curbing their output. Even more reported a shortage of materials (28 percent of companies) and labour (27 percent) (also as of October). The highest contribution to growth was once again exports. Exports increased across the board, with overall nominal growth of 5.3 percent. Exports to the United States increased by 7.1 percent, with German machinery producers benefiting from the buoyant U.S. economy and more favourable depreciation rules. Goods delivered to China went up by a resounding 9.6 percent, fuelled by momentum from the Made in China 2025 initiative and the country’s drive towards automation. Goods delivered to EU partner countries also recorded above-average growth of 6.6 percent. Various factors spurred growth in this region. In France (up 4.6 percent), the main factor was the improvement in the investment climate through new reforms, in Italy (up 9.5 percent) improved depreciation regulations and in the United Kingdom (up 5.1 percent) sales brought forward in anticipation of Brexit. Incoming orders are, on the other hand, indicating a shift in growth from abroad to at home. Foreign orders only increased by four percent last year while orders from at home pulled ahead with six percent growth. One percent growth in production in 2019 Machinery producers have had a persistently high level of orders in hand. In January 2019, orders in hand amounted to 8.5 production months. This will cushion the impact of a weaker level of incoming orders for the first few months of the year but not for the whole year. Factors boosting the economy have been flagging for quite some time now, alone through cyclical change. Additional factors disrupting trade include the unresolved tensions between the United States and China, the threat of a trade dispute between the United States and the EU, Brexit, the anti-business stance of the Italian government, and faltering reforms in France. And this list is not even complete. These factors are all costing business – as already reflected in the incoming orders for January and also, in part, in December – as high levels of uncertainty will make some potential investors postpone their investments.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
These are all general risks facing the overall economic environment and it is difficult to foresee what the exact consequences will be for mechanical engineering specifically. Many decisions still need to be made, it cannot even be ruled out that these fears will not turn out to be unfounded or at least relativized. For example, agreement may still be reached to resolve the trade tensions between the United States and the EU thus preventing duties spiralling between the United States and the EU from the outset. In this context, the German Mechanical Engineering Industry Association (VDMA) slightly downwardly revised its growth forecast for production of two percent (as of September 2018) to one percent at its Hannover Messe press conference.
Contact: Olaf Wortmann / Phone: +49 69 6603 1373 / Mail: olaf.wortmann@vdma.org
Nonferrous metal industry In 2018, the German nonferrous metal industry, which is a key industry for electric mobility, produced 8.3 million tonnes (down 2.2 percent year on year) and generated a revenue of 53 billion euros with a workforce of 111,000 and 654 companies. It generated 89 percent of its revenue in the European Union, 53 percent of which in Germany. The nonferrous metal industry is divided into the following stages of the value chain: production (raw metal), semi-finished products (ribbon, sheets, rods, profiles, pipes and wire), further processing (foil, thin ribbon, tubes, aerosol cans, other cans and powder), casting and hot-dip galvanising. In 2018, the aluminium industry produced around 1.3 million tonnes of raw aluminium, just over two percent less than the previous year. The production of semi-finished aluminium products in 2018 was around 2.5 million tonnes which is almost the same as in 2017. Production in the aluminium further processing segment, on the other hand, dropped by two percent compared to the previous year, down to 340,000 tonnes. In base metals (copper, zinc, lead, nickel, tin and rare metals), raw metal producers decreased their output in 2018 by six percent, down to 1.2 million tonnes. Producers of semi-finished base metal products recorded a drop of two percent to 1.8 million tonnes. The nonferrous metal foundry industry produced 1.2 million tonnes of cast parts last year which is over two percent less than 2017. In view of the economic risks (Brexit, US import duties on cars), production in the nonferrous metal industry will, at best, increase slightly in 2019. Tangible drop in nonferrous metal trade with the United Kingdom in 2018 The foreign revenue of the nonferrous metal industry in 2018 amounted to 25 billion euros. This corresponds to an export quota of 47 percent. Germany is a net importer of crude metal as well as ores and concentrates. This means that the country imports substantially more crude metal than it exports, reflecting the dependence of Germany industry on imports from abroad of some of these raw metals such as aluminium, nickel, zinc, tin and several rare metals. Imports of raw metal decreased by one percent in 2018 compared to 2017, going down to 4.2 million tonnes. Exports of raw metal dropped three percent, down to 891,000 tonnes. Germany is, on the other hand, a net exporter of semi-finished products. The export-oriented semi-finished products industry benefited from a good one percent increase in foreign demand, which rose to 3.3 million tonnes. Imports amounted to 2.2 million tonnes, which is a slight increase year on year. The industry as a whole is concerned about the increasing protectionist trends around the world, which have already led to distortions on the market. The United
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Kingdom remained the second largest market for the German nonferrous metal industry after Germany and thus its most important export market. Eleven percent of raw metal and semi-finished exports were destined for the UK. Exports to the UK slumped ten percent compared to 2017, down to 453,000 tonnes, with imports from the UK down four percent to 282,000 tonnes.
Contact: Oliver Eisenberg / Phone: +49 30 7262 071 67 / Mail: eisenberg@gdb-online.org
Situation of the steel industry in April 2019 In terms of volume, the steel industry pedalled backwards in 2018, with rolled steel supplied to the market dropping by four percent in the year on average, deliveries down by five percent and a reduction in raw steel production of two percent. Special factors such as the switch to the new emissions testing procedure in the automotive industry and the low water levels on the Rhine in the final quarter of last year, contributed to the downward trend. The steel industry remained subdued in the first quarter of the current year. In the ifo business survey conducted in March, the majority of companies in the industry rated their business situation as negative for the first time in just under one and a half years. Figures from the Federal Statistical Office show a clear drop in incoming orders for rolled steel at the start of the year. On a positive note, business prospects have stabilised according to the ifo economic survey, although companies are still sceptical about their prospects for the next six months. Momentum in the steel industry has also weakened generally on a global level since the second half of last year. Looking ahead, the industry faces substantial downward risks. Furthermore, as set out in the recent OECD assessment, the global steel industry is beset with structural problems in the form of entrenched excess capacities, the rise in protectionist trends, and distortions to competition caused by state subsidies. In view of the overall economic situation, the steel industry believes that the EU’s imposition of definitive safeguard measures was a necessary step to contain the rerouting effects of the punitive duties of the United States on the EU market. However, the steel industry is concerned about the plans to start easing up import quotas as early as July despite the fragile shape of the economy as this move will tangibly limit the effectiveness of these measures.
Contact: Dr. Martin Theuringer / Phone: +49 211 6707 105 / Mail: Martin.Theuringer@wvstahl.de
Steel and metal processing: production grows 1.9 percent in 2018 – start and way ahead in 2019 marked by uncertainty After a good start to 2018, with growth up five percent year on year, production lost steam in the further course of the year. While the industry kept up the four percent growth forecast until the middle of the year, momentum tailed off tangibly in the second half of the year. Fourth quarter growth was negative year on year. Production increased by 1.9 percent in the year overall.
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Revenue trended similarly to production with both domestic sales and exports registering high growth rates of ten percent and seven percent respectively at the start of 2018, before petering down to 1.8 percent for domestic sales and one percent growth for exports. Incoming orders dropped year on year, with domestic orders down 2.3 percent and foreign orders down 6.2 percent, although large orders received in the fourth quarter 2017 distort the comparison here. The main factor driving these developments is easy to pinpoint, namely uncertainty – uncertainty on the part of consumers and investors in many major markets. Car sales in China, for example, have pointed down since summer 2018, bending under the strain of trade tensions with the United States; the EU and the United Kingdom have still not found a feasible way of implementing Brexit; the debate on driving bans is making buyers in Germany delay their new car purchases; the United States and the EU are closing off their steel markets; the United States see EU car imports as a national security issue and are threatening to impose higher import taxes – there are many more issues (Iran, Turkey, Russia), which are all contributing to a particularly high level of overall uncertainty. This uncertainty also extends to economic researchers, who have, in part, substantially downwardly revised their forecasts for 2019 as these challenges will not even be close to being resolved this year either. Several special effects also played into the equation in 2018 such as the new driving cycle to measure vehicle emissions and the dry periods which caused disruptions in supply chains. The industry thus started out 2019 on a negative trajectory with revenue dropping by 2.9 percent, domestic sales by 4.2 percent, exports by 0.2 percent, domestic orders by 9.6 percent and foreign orders by 8.5 percent. The business climate in the steel and metal processing industry deteriorated further in March. The rating of the current business situation decreased by 8.1 index points, business prospects for the next six months by 2.5 index points. The business climate of the industry is following the downtrend in manufacturing, while less export-focused sectors of the German economy are still feeling more positive. Brexit and trade disputes are making long-term planning exceedingly difficult for companies with the result that many investment decisions are being postponed. Growth is expected to be negative in the first six months of 2019. The environment may become more favourable in the further course of the year. Brexit should have all but disappeared from the media and public debate by the time of the European elections, and the United States and China are in negotiations – any progress made here would greatly reduce the level of uncertainty on the major markets. The steel and metal processing industry should then manage to grow at a similar pace to last year, which was two percent, buoyed by the base effect of the weak second half of 2018. The crisis scenario of 2008 is highly unlikely to be repeated in view of the stabilised financial markets and robust corporate structures. The ongoing rise in employment in the industry is another indication that growth may increase in the second half of 2019. The number of workers increased by 3.7 percent last year.
Contact: Holger Ade / Phone: +49 233 1958 821 / Mail: hade@wsm-net.d
Textile and clothing industry In 2018, revenue in the industry decreased by 1.9 percent overall. The reduction in clothing revenue was particularly pronounced, falling 4.4 percent, while revenue of textiles only dipped 0.4 percent. The downward trend became steeper in the second half of the year. A look at the proportion of domestic
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
and foreign sales reveals that the home front was mainly responsible for the negative performance. The contribution of foreign sales to overall revenue and to revenue in textiles was positive and only marginally negative for clothing. The high proportion of sales within the euro area underline the significance of the EU and the euro area in particular for the economic development of this industry. The upward trend in exports continued, particularly the export volume of clothing which increased 8.7 percent. The volume of textiles exported and imported remained virtually level with only a nudge up of 0.1 percent in both cases. In 2018, the trade volume of clothing exported to within the EU expanded strongly, triggered mainly by expansions and shifts within the Community value chains. Irrespective of the final destination of the traded goods, the EU remains by far the most important destination for German textile and clothing exports. The largest export market outside the EU is still the United States, although German exports to China continue to rise. Employment figures in Germany for the industry show an annual reduction of workers of 0.5 percent. The German textile and clothing industry currently employs about 118,000 workers which is around 1,000 less than one year ago. Employment is becoming a downstream indicator in the different subsegments, trending similarly to revenue. Textiles still employs 0.9 percent more workers than one year ago, while in clothing the number of workers dropped by 3.5 percent. The unfavourable economic environment has thus put an end to the upward trajectory in employment over the last few years. The number of workers had, in contrast to general trends, been growing continuously during the three years previously. In 2018, clothing retailers failed to benefit from the good shape of the domestic economy and brighter consumer sentiment as it had in 2017. While retail sales overall increased by 2.9 percent, clothing retail sales dropped by 1.6 percent. Earnings of textile and clothing companies were put under substantial pressure last year through, in part exorbitant, increases in the prices of almost all important raw materials. Outlook Early indicators do not signalise a lasting improvement in the level of economic activity in the industry in the short term. For the further course of 2019, hopes are that the situation will stabilise so that the industry can find its way back to growth.
Contact: Marcus Jacoangeli / Phone: +49 30 7262 2024 / Mail: mjacoangeli@textil-mode.de
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Industry Report | Industrial production and trade in the individual industries 11/04/2019
Imprint Bundesverband der Deutschen Industrie e.V. (BDI) Breite Straße 29 10178 Berlin T: +49 30 2028-0 www.bdi.eu Author Thomas Hüne T: +49 30 2028 1592 t.huene@bdi.eu Editorial / Graphics Dr. Klaus Günter Deutsch T: +49 30 2028 1591 k.deutsch@bdi.eu Marta Gancarek T: +49 30 2028 1588 m.gancarek@bdi.eu
This Industry Report is a translation based on “Industriebericht – April 2019“ as of 05 April 2019.
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