November 2019 INDUSTRIAL POLICY DOSSIER
Industry Report Industrial production and trade in the individual industries
▪
We expect manufacturing output in Germany to drop by four percent this year. Following six years of growth, German industry has been in recession since the third quarter 2018.
▪
After two years of more than three percent growth each year, global industrial production is faltering and will only rise by one percent in 2019. We are even expecting industrial production to stagnate in the advanced economies. Growth in industrial production in emerging countries will only rise by two percent. This is the slowest pace of growth seen in the last ten years.
▪
In the current year, we expect German exports to increase by a mere one-half percent. In the previous year, exports grew by 2.1 percent. Exports have not registered such weak growth as this year since 2009.
▪
We expect global goods exports to decrease by one-half percent. Goods exports from advanced economies should rise slightly in 2019, while those from emerging countries are set to drop by one percent.
Industry Report | Industrial production and trade in the individual industries 28/11/2019
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 Industrial production by region ....................................................................................................... 11 Germany comes last among the five big economies in Europe; Spain’s industry is even growing .... 11 Northern Europe .................................................................................................................................. 11 Eastern Europe ................................................................................................................................... 12 Germany .............................................................................................................................................. 13 France ................................................................................................................................................. 14 Italy ...................................................................................................................................................... 15 Spain ................................................................................................................................................... 16 United Kingdom ................................................................................................................................... 17 Global trade ......................................................................................................................................... 18 Industrial sectors in Germany ......................................................................................................... 20 Aluminium industry records substantial drop in production ................................................................. 20 Automotive industry ............................................................................................................................. 20 Construction industry set to continue growth in 2020 although prospects deteriorate slightly ........... 21 Building materials industry: growth weakens ...................................................................................... 22 Chemical industry: no turnaround in sight ........................................................................................... 23 German electrical and electronics industry: global insecurity constraining economic development .. 24 Electrical and electronic exports: restrained growth in 2019 ............................................................... 25 Foundry industry in recession mode ................................................................................................... 25 Ceramics industry ................................................................................................................................ 26 Machinery manufacturing: persistent weak demand ........................................................................... 27 Situation of the steel industry in November 2019 ............................................................................... 29 Steel and metal processing: production 3.9 percent down year on year after three quarters ............ 29 Imprint ................................................................................................................................................ 31
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
Global industrial production Following annual growth of more than three percent in each of the past two years, global industrial production looks set to expand only marginally in 2019. According to figures published by the Netherlands Bureau for Economic Policy Analysis (CPB), in the first eight months of the current year industrial production rose by just 0.8 percent compared to the same period the previous year. Industrial output has been steadily losing momentum since the turn of the year 2017/2018. The global purchasing managers’ index for manufacturing is not just indicating a further slowdown in growth: falling below 50 points, it has been signalising downward production since May 2019. Following a low point in July, the sentiment indicator climbed up again slightly in the following three months but has still not left contraction territory. The increasingly weak growth pattern has been synchronous in the advanced economies and emerging countries. Since June 2019, the advanced economies have even recorded negative rates of growth. Growth rates in emerging countries remain positive and are still managing to compensate for the declining production in advanced economies. If production continues at the level of the third quarter throughout the fourth quarter, global industrial production will only register a one percent increase in 2019 compared to the previous year.
World: Industrial production*, Purchasing Managers Index emerging economies advanced economies 5 Purchasing Managers Index seasonally adjusted (left axis)
55 54
4 53 52
3
51 2 50 49
1
48 0 47 46
-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
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
Industrial production in advanced economies US industry remains stable while production decreases in euro area and Japan Industrial production in the advanced economies is heading for stagnation this year. Although production levels in the first two quarters were still slightly positive compared to the same period last year, the pace of growth tailed off considerably in the further course of the year, slipping into negative territory in June. In the first eight months of the year overall, production only increased by 0.3 percent year on year. The trend in production levels varied greatly across the different regions. While industrial production dropped by 1.3 percent in the euro area and in Japan, the remaining advanced economies and the United States managed to grow their industrial output by 1.3 and 1.6 percent respectively. The latest figures indicate that the slowdown is likely to continue. The purchasing managers’ index for manufacturing for this group of countries has not signalised growth since April and moved sideways between July and October. If production remains at the current level, the annual result will be stagnation.
Advanced economies: Industrial production*, Purchasing Managers Index other advanced economies Euro area Japan USA Purchasing Managers Index seasonally adjusted (left axis)
58
5
56
4
54
3
52
2
50
1
48
0
46
-1
44
-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)
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
Industrial production in emerging economies Growth only in Eurasia, while recession deepens in Latin America Among emerging countries, industrial production in 2019 is set to be much weaker than in the past. There are several reasons for this slowdown. The trade disputes between the United States and China have not only affected industrial activity in Asian emerging countries. Chinese industry only increased output by 5.6 percent in the first eight months of the current year. In the other Asian emerging countries, production stagnated following 3.8 percent growth last year. Industrial production in emerging countries in Africa and the Middle East dropped two percent, the first decline registered here after five years of growth. Industry in Latin America is in its sixth year of recession and is likely to record the biggest production drops yet in that period with minus five percent. The situation is much more robust in Central and Eastern Europe where industrial production rose for the fourteenth quarter in a row. In the remaining four months of the year, industrial production should rise at a slightly higher pace but will not match the growth rate seen last year. The manufacturing purchasing managers’ index for emerging countries, which even indicated contraction in June, has risen to expansion territory over the last four months. On account of the slightly livelier activity indicated by the latest figures, we expect production for 2019 overall to be just under two percent compared to the previous year. This would be the lowest rate seen in ten years.
Emerging economies: Industrial production*, Purchasing Managers Index Africa/Middle East Latin America Central and Eastern Europe Asia (excluding China) China Purchasing Managers Index seasonally adjusted (left axis)
53
5
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)
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
United States Manufacturing stagnates Although the growth of U.S. industry has lost pace considerably, it should remain positive this year. In the first two quarters of the current year, industrial production still recorded growth rates of 2.9 percent and 1.2 percent respectively. At the start of the second half of the year, growth slowed down considerably to only 0.2 percent. The first nine months of the year thus saw industrial production increase 1.4 percent compared to the same period last year. Manufacturing output rose significantly less, going up only 0.2 percent. Among the individual industries in the manufacturing sector, machinery manufacturing continued to pursue last year’s robust growth path until the middle of this year. Production in this sector registered its tenth successive quarter of growth before turning negative in the third quarter 2019 year on year. The electrical and electronics industry is now in its third year of growth. The food industry also put in a positive performance continuing the upturn that has now lasted for the past seven years. Output in the chemical industry decreased despite a good performance from pharmaceuticals. Vehicle manufacturing saw production declining in the first nine months of the current year.
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
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 Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
The latest figures point towards a slight recovery following the weak performance in the middle of the year. In the two-month comparison of August/September 2019 compared to the same period the previous year, calendar and seasonally adjusted output increased slightly in both industrial production
6
Industry Report | Industrial production and trade in the individual industries 28/11/2019
and the manufacturing sector. The purchasing managers’ index for manufacturing is now pointing up again. In October it rose for the second time in a row and is now signalling expansion at 51.3 index points. Following two years of robust growth in manufacturing, we are expecting production to stagnate this year. The production sector is set to expand by between 0.5 and one percent. China Chinese industry (industrial production excluding construction) is set to continue its upward trajectory in 2019, although growth will not be quite as robust as the previous year. Following an increase in production of 6.3 percent in the first quarter, growth slowed down significantly in the second quarter with output rising by just 5.5 percent. In the first six months of the year, production thus increased by 5.9 percent compared to the same period last year. The pace of growth slowed down considerably at the beginning of the second half of the year. In July and August growth in industrial production was down to only 5.1 percent and 4.4 percent respectively. For the first eight months of the current year, production was still up 5.6 percent on the same period last year. Judging by the sentiment indicators, we expect production for the year overall to increase by around six percent. In October 2019, the purchasing managers’ index for manufacturing rose for the fifth time in a row since June 2019 climbing up to 51.7 index points which is its highest level yet this year.
China: Industrial production*, Purchasing Managers Index 52
10 9
51 8 50
7 6
49
5 48 4 47
3 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 Sources: Macrobond, Netherlands Bureau for Economic Policy Analysis (CPB)
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
Japan Industrial production drops after two years of growth Following two years of growth, Japanese industry is facing a drop in production for the year 2019. Output in the production sector fell by 1.7 percent in the first quarter 2019 and 2.3 percent in the second quarter (both year on year) but the downward trend did not accelerate further. In the third quarter 2019, production only dropped slightly, going down 0.9 percent compared to the same quarter last year. In the first nine months of the current year production was thus down by 1.7 percent. The manufacturing sector fared only marginally better with a drop of 1.2 percent, although individual sectors did manage to increase production. The electrical and electronics industry registered its first rise in nine years with production rising by 3.5 percent. In vehicle manufacturing production increased by 2.4 percent. The chemical industry increased its output by 1.5 percent (basic chemicals). Pharmaceuticals pulled down growth in chemicals overall to 0.7 percent. Machinery manufacturing is set to end the year with a significant decline following a drop in production of 5.4 percent in the first nine months. Industrial activity is likely to remain weak until the end of the year. The manufacturing purchasing managers’ index dropped for the fourth time in a row, sliding down to its lowest level this year in October. The latest figures do not show a turnaround in the downward trend. If production levels remain steady in the fourth quarter, industrial production in Japan will decrease by two 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
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 28/11/2019
South Korea Industrial production declining, but should stabilise towards year end South Korea’s industry continued to grow until the end of 2018 but started contracting in the first quarter 2019, dropping off by 1.7 percent. Machinery manufacturing and the chemical industry, in particular, stalled output in the production sector. The downward trend continued in the second quarter across almost all industries except pharmaceuticals. In the third quarter, output decreased for the third consecutive quarter although, at minus 1.1 percent, the drop was slightly less pronounced. All in all, the first nine months of the year saw output in the production sector decrease by 1.7 percent. Manufacturing output also dropped by 1.7 percent in the first nine months of the year compared to the same period the previous year. Among the individual industries, South Korea’s machinery manufacturers suffered a substantial deterioration of business. As of September, production fell by 8.9 percent. In the previous year, production dropped by 3.5 percent. Chemicals excluding pharmaceuticals recorded an above-average drop of 4.1 percent. Including pharmaceuticals, production only fell by one percent. The electrical and electronics industry reduced its output by two percent compared to last year. Vehicle manufacturing output only dropped by 0.3 percent. The latest figures point towards a stabilisation. In the two-month comparison August/September 2019, calendar and seasonally adjusted industrial production increased by 0.4 percent compared to the previous two months, rising for the fourth time in a row. Although the last two values for the purchasing managers’ index were below the expansion threshold of 50 points, they were significantly higher than in the middle of the year. If production levels remain at the level of the previous quarter, industrial production for 2019 as a whole will be down by one percent. As the sentiment indicators have improved slightly at last count, we expect production for 2019 to drop by only 0.5 percent.
South Korea: Industrial production*, Purchasing Managers Index 53
6
4 51 2 49 0 47 -2
45
-4 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 28/11/2019
European Union Stagnation following five years of upturn After five years of growth, industry in the European Union (EU28) is slowly sliding into a technical recession. After a minimal rise of 0.1 percent in the first quarter 2019, industrial production (excluding construction) declined by 0.6 percent in the second quarter compared to the same period last year. The downward trend then accelerated slightly in the third quarter. Based on the data for the first nine months, production was down by 0.6 percent compared to the same period last year. Robust activity in construction managed to bring industrial output as a whole into positive territory year on year. Manufacturing recorded a decrease in production of 0.6 percent as of September 2019. The slight downward trend in vehicle manufacturing output seen last year accelerated in the first nine months of the year dropping by 6.1 percent. The electrical and electronics industry and the metal processing industry also recorded above-average drops in production. Machinery manufacturing and the chemical industry only fell just short of last year’s levels. Pharmaceuticals experienced high growth of over eight percent, levels last seen in 2015. Production increases were also recorded by the food industry.
European Union: Industrial production*, Purchasing Managers Index 60
5
58
4
56
3
54
2
52
1
50
0
48
-1
46
-2
44
-3 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
The latest developments indicate further production contractions in the further course of the year. In the two-month comparison August/September 2019 compared to the same two months in 2018, industrial production in the EU dropped by 1.5 percent following seasonal and calendar adjustment. The
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
purchasing managers’ index for manufacturing has signalised contracting production since February 2019 and dropped to its lowest level this year in September. The index did, however, turn up minimally in October, rising by 0.2 index points. We are expecting production to decline further in the fourth quarter, bringing industrial production in the EU for 2019 down by one percent year on year.
Industrial production by region Germany comes last among the five big economies in Europe; Spain’s industry is even growing The economic slump in European industry is afflicting almost all the major economies of the European Union. The only exception is the manufacturing sector in Spain, which bucked the trend by increasing its production by 1.3 percent by September compared with the end of 2018. Bringing up the rear in this group of five is German industry, whose production as of September 2019 sank by three percent compared to the end of 2018. In the UK, industrial production fell by slightly more than one percent over the same period. The Italian and French industries hardly reduced their production compared with the end of the year.
Development of the industrial production* since 2015 108 Spain 106 Italy 104
France
102
United Kingdom Germany
100
98
96 2015
2016
2017
2018
2019
*Production index: six-month average, after calendar and seasonal adjustments (2015=100) Source: Macrobond
Northern Europe Among the group of Northern European EU member states, Danish industry achieved the strongest growth in output since the end of 2018, going up 2.2 percent. In Finland, too, the manufacturing sector recorded an increase in production, but at one percent it was not even half as strong. Production in Swedish industry has stagnated since the turn of the year. In the Baltic states, industrial production fell
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
by 0.7 percent in Estonia and by 0.4 percent in Latvia over the same period. Development of the industrial production* in selected countries of Northern Europe 125 Latvia Denmark
120
Finland
115
Estonia Sweden
110
105
100
95 2015
2016
2017
2018
2019
*Production index: six-month average, after calendar and seasonal adjustments (2015=100) Source: Macrobond
Eastern Europe Industrial activity in the Central and Eastern European countries of the European Union continued to show robust growth. In Hungary, production in the manufacturing sector has risen by four percent since the beginning of 2019. Polish industry increased its output by 3.4 percent and the Czech Republic by two percent. Production losses of one percent were recorded by the manufacturing industry in Slovakia and Austria. Development of the industrial production* in selected countries of Eastern Europe 125 Poland 120
Hungary Czech Republic Slovakia Austria
115 110 105 100 95 90 2015
2016
2017
2018
2019
*Production index: six-month average, after calendar and seasonal adjustments (2015=100) Source: Macrobond
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Industry Report | Industrial production and trade in the individual industries 28/11/2019
Germany Industry in recession After six years of growth, German industry has been in recession at least since the turn of the year 2018/2019. In Germany, industrial production (excluding construction) is expected to fall by 4.5 percent in the current year. After a decline of 1.7 percent in the first quarter 2019, the second and third quarters each saw much more substantial production losses of over four percent. Based on the data for the first nine months of the current year, production has fallen by 4.3 percent compared with the same period of the previous year. In the manufacturing sector, output in the period from January to September hardly fared better, going down four percent. Among the individual sectors, machinery manufacturing recorded the smallest decline in production, contracting by just under two percent, followed by the metal processing industry with a drop of three percent, the chemical industry with minus 3.2 percent and the electrical and electronics industry with minus 3.8 percent. Production in the pharmaceutical industry was down by almost one fifth due to a special effect from the previous year, while the weak global demand for passenger cars and structural change in the automotive industry resulted in production losses of just over ten percent. For the remaining months of the current year, there are still no signs of an economic upturn for industry. On a two-month basis, August/September 2019 saw seasonally and calendar-adjusted industrial production fall again slightly by 0.1 percent compared with the previous period. Since January 2019, the purchasing managers’ index for manufacturing has indicated declining production and fell to a new low for the year in September. The rise of 0.4 index points in October brought no real improvement. Based on the production trend to date, sentiment indicators and individual industry assessments, we expect production in the manufacturing sector to decrease by four percent.
Germany: Industrial production*, Purchasing Managers Index 65
8 6
60 4 55
2 0
50
-2 45 -4 40
-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 28/11/2019
France Low growth in the fifth year of upturn In France, industrial production (excluding construction) will again slightly expand this year and thus record growth for the fifth year in succession. Following an increase of 0.6 percent in the first quarter 2019, the pace of expansion in the second quarter increased significantly to 1.6 percent. Production then fell slightly in the third quarter but was still up 0.6 percent in the first nine months of the current year. In the manufacturing sector, production increased by 0.7 percent over the same period. Growth was driven by the chemical industry, on account of the strong performance by pharmaceuticals, and the electrical and electronics industry. At minus 1.4 percent, the metal processing industry recorded the sharpest decline among the key industries. In machinery manufacturing, output was only just below last year’s levels. At minus 0.7 percent, the decline in production in vehicle manufacturing was comparatively small compared to other European countries. By the end of the year, industrial activity should pick up somewhat. On a two-month basis, August/September 2019 saw industrial production fall by 0.5 percent on a seasonally and calendaradjusted basis compared with the previous two months. On a positive note, the purchasing managers’ index for industry rose again in October and has now been in expansion territory for three consecutive months. Even a slight decline in production in the remaining three months of the year should not jeopardise a positive annual result. In view of the improvement in sentiment seen recently, we expect production to increase by one-half percent in 2019 as a whole. 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
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 28/11/2019
Italy Crisis in vehicle manufacturing restrains industrial production In Italy, industrial production (excluding construction) fell for the fifth consecutive quarter in September 2019 compared with the same quarter of the previous year. Since the turn of the year, the decline in production has accelerated further. After a decline of 0.6 percent in the first quarter and 1.1 percent in the second quarter 2019, production fell by 1.5 percent in the third quarter. In the first nine months of the current year, production has fallen by 1.1 percent compared with the same period of the previous year. The manufacturing sector recorded an even more pronounced decline in production in the first nine months of the year. Output in vehicle manufacturing, which has faltered since the summer of last year, dropped a further 9.2 percent as of September 2019. This has affected supplier industries as well. Production in the metalworking industry fell by 3.7 percent and in machinery manufacturing by 2.5 percent. The electrical and electronics industry and pharmaceutical business produced only slightly less than the previous year. Chemical industry output, in contrast, was slightly higher year-on-year. For the remaining three months of the current year, figures indicate a further decline in production. On a two-month basis, August/September 2019 saw industrial production decline by 2.4 percent after seasonal and calendar adjustment compared with the previous period. The purchasing managers’ index for manufacturing has been languishing below the threshold of 50 since September 2018. It has fallen for two consecutive months and is now only 0.3 index points above the low for the year. We expect production to fall further in the remaining three months, bringing the annual result to a decrease of 1.5 percent.
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 (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 28/11/2019
Spain Industry continues upward trend Of the five large EU economies, Spain’s industry is still on a clear upward trajectory. In the first quarter, industry (industrial production excluding construction) posted a slight decline in production compared to the previous year. In the second and third quarters, production then rose by 1.4 and 0.8 percent respectively. For the first nine months of the current year, production is up by 0.6 percent. Among the key industries of the manufacturing sector, the pharmaceutical industry was able to expand its production by more than four percent in the first nine months. Growth was similarly strong in the food industry. With an increase of 1.4 percent, the metal processing industry also performed above average. The chemical industry and the electrical and electronics industry both increased output by a below average one-half percent. After three years of strong growth, machinery manufacturing suffered a slight drop in production. Vehicle production was somewhat below the previous year’s level but should catch up a little by the end of the year. The latest available data point to a rather weak development up to the end of the year. In the calendar and seasonally adjusted two-month comparison August/September 2019 compared to the previous two months, production in the manufacturing sector stagnated. In June, the purchasing manager index for Spanish manufacturing fell into the contraction zone, then recovered slightly before falling to a new low for the year in October. We expect production to fall slightly in the fourth quarter which will bring the annual result in Spain’s industrial production to an increase of one-half percent compared with the previous year.
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 28/11/2019
United Kingdom Impending Brexit hampers growth The UK’s industrial sector is unlikely to continue its growth course this year. In the first quarter 2019, industrial production (excluding construction) was still able to expand slightly with output increasing by 0.2 percent. In the second quarter, industrial activity faltered substantially, going down 0.9 percent. The downward trend in production continued in the third quarter. In the first nine months of the year, production thus decreased by 0.7 percent compared with the same period of the previous year. Manufacturing output fell by 0.6 percent in the same period. Among the key sectors, vehicle manufacturing recorded the sharpest drop in production, going down by 8.5 percent. The decline in machinery manufacturing was also strong at minus 5.8 percent. The metal processing industry was only partially affected by this development, with production falling by only 0.8 percent. In the electrical and electronics industry, production increased by 3.4 percent. The chemical industry reported a production increase of one percent and, together with a strong performance by pharmaceuticals, was even up 2.8 percent. The latest figures show no signs of an end to the downward trend in the manufacturing sector. In a calendar and seasonally adjusted two-month comparison of August and September 2019 with the previous two months, industrial production fell by 0.7 percent. Since May, the purchasing managers’ index for manufacturing has been below the expansion threshold. From August to October it rose by more than two index points to a value of 49.6. If production levels of the third quarter are held in the fourth quarter, the annual decline will be 0.7 percent. In view of the slowly improving sentiment indicators, we expect production in the current year to decline by only one-half percent compared to the previous year. United Kingdom: Industrial production*, Purchasing Managers Index 60
6
58 4
56 54
2 52 50
0
48 46
-2 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 28/11/2019
Global trade For the first time since 2009, global trade in goods is unlikely to increase this year. According to the Netherlands Bureau for Economic Policy Analysis (CPB), the global trade volume fell by 0.3 percent in the first eight months of 2019 compared with the same period of the previous year, after rising 3.1 percent the previous year. For the year overall, a decline of about one-half percent is likely in view of the course of developments so far. In the first eight months of the current year, emerging markets exported a total of 0.8 percent less goods than in the same period last year. Among the individual groups of countries, only goods exports from Latin America and China increased. Exports of goods from Africa and the Middle East fell most sharply by 2.4 percent, while those from the Asian emerging countries excluding China dropped by 1.7 percent. The countries of Central and Eastern Europe exported one percent less goods than in the same period last year. Exports from developed economies stagnated in the first eight months of the current year. While the United States was able to slightly increase its exports by 0.1 percent, exports from Japan fell by two percent and those from the euro area by 0.2 percent. Only the remaining developed economies exported 1.5 percent more than a year ago.
World: Exports according to region of origin advanced economies
6
emerging economies
5 4 3 2 1 0 -1 -2 2014
2015
2016
2017
2018
2019
Index: two-month average, after calendar and seasonal adjustments, in percent, year on year Source: Macrobond
18
Industry Report | Industrial production and trade in the individual industries 28/11/2019
Development of German exports With a nominal increase of 2.5 percent compared to the same period last year, German exports rose more in the first quarter of 2019 than at the end of 2018. In the second quarter, export activities declined significantly. Exports of goods and services fell by 0.4 percent year-on-year. Exports to EU member states that are not part of the euro area fell especially sharply. The third quarter saw a slight upturn, bringing the results for exports in the first nine months of the current year to a positive 0.9 percent. In terms of destinations, exports to the USA, which increased by 5.9 percent year-on-year, contributed most to the growth in exports. Exports to Asia rose only slightly, going up one percent. While exports to the euro area almost stagnated, nudging up by a meagre 0.1 percent, exports to the remaining EU member states fell by 1.1 percent. Exports to the remaining countries rose by two percent. For the current year as a whole, we expect German exports to grow by just one-half percent. In the previous year, exports increased 2.1 percent. The increase in exports this year will be the lowest seen since 2009.
Germany: Exports according to region of destination remaining countries Asia USA non Euro area Euro area
12 10 8 6 4 2 0 -2 -4 2014
2015
2016
2017
2018
2019
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 28/11/2019
Industrial sectors in Germany Aluminium industry records substantial drop in production From January to September 2019, Germany produced around 907,200 tonnes of aluminium, which is eight percent less than in the previous year. This includes both recycled aluminium (58 percent) and primary aluminium (42 percent). The drop in recycled aluminium (down nine percent) was greater than in primary aluminium (down six percent). Production of semi-finished aluminium products (rolled products, extruded products, conductors and wires) at 1,963,200 tonnes as of September was five percent above the same period last year and was the only segment to register higher output. However, the trend among the individual products was highly divergent. Production of rolled aluminium products amounted to 1,530,600 tonnes, which is an increase of 9.4 percent compared to the same period last year. A large proportion of rolled products goes to consumer-related markets. The production of extruded products, on the other hand, registered an output drop of 9.1 percent between January and September 2019 (413,500 tonnes). Most of these products are destined for the transport sector, the construction industry and machinery manufacturing. Aluminium processing companies produced a total of 272,800 tonnes in the first three quarters of 2019. This corresponds to a decrease of six percent compared to the same period the previous year. These companies produce foil, thin ribbon, tubes, aerosols and other cans as well as metal powder. All subsegments of this segment trended negatively. The main buyer for aluminium processing is the packaging sector. The German aluminium industry has thus mainly seen a negative trend in activity. Sentiment among companies in the industry for the coming months remains somewhat subdued. All in all, production is expected to decline significantly in 2019. Exports slightly positive From January to August 2019, exports were a mainstay for companies in the German aluminium industry. Exports in the highly export-oriented rolled aluminium goods segment rose by a total of 4.2 percent. The upward trend here was particularly marked for exports to the United States (up 98.1 percent). Exports to EU28 countries managed to increase by 5.1 percent.
Contact: Dr. Andreas Postler / Phone: +49 211 4796 118 / Mail: andreas.postler@aluinfo.de
Automotive industry Production The production of passenger cars in Germany has declined again this year. In the first ten months of the year a total of 3.98 million units rolled off German assembly lines, which is nine percent less than in the same period last year. This indicates a consolidation in production, a process which we already witnessed some years ago in many other key automotive countries in Europe including Italy and France. In Germany, the production of small cars is steadily losing significance. Not least because of
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the high labour costs involved in this high-volume segment, German carmakers are increasingly shifting production to other European countries. High-value premium cars, on the other hand, are still being produced in Germany. Furthermore, the automotive industry is currently in a process of transformation. While low-emission petrol and diesel passenger cars still account for the lion’s share of production, electric vehicles manufacturing is being pushed. Germany is already the most important location for the production of electric passenger cars outside of the United States and China. Last year more than 180,000 cars with electric engines were produced. This figure is set to increase substantially next year on account of several new high-volume models. Employment in the automotive industry with over 835,000 employees is still close to record levels but is gradually flaking and is likely to come under pressure in the next few years, particularly in the area of automotive components. The most important segment for production within Germany in the first nine months of the year was compact cars, with a share of 27 percent (previous year: 26 percent). In second place were four-wheel drives/SUVs which are continuing to catch up and now account for 22 percent (previous year: 20 percent). This is quite a low proportion compared to the German market (and many other markets) where this category of cars has a 31 percent market share. This is another factor contributing to downward production. German carmakers tend to produce abroad the relatively fuel-efficient compact SUVs that are very popular with customers. In the first three quarters of 2019, the share of diesel passenger cars in domestic production decreased by 1.5 percentage points down to 33.6 percent. But the proportion of diesel cars has risen again since August and now seems to have bottomed out. Diesel engines remain the best option for the climate apart from alternative drives due to their efficiency and economy. The combination of both worlds in the form of the plug-in hybrid “Made in Germany� ensures that local emissions are kept to a minimum and, particularly in the case of the diesel plug-in, provides a high range and low consumption during long journeys. Exports Exports are key to the German automotive industry. Three quarters of all cars produced in Germany are exported. Due to the weak trend in the automotive industry worldwide, exports slumped twelve percent in the first nine months of the year. The biggest market for German car exports is still the United Kingdom. In the course of the year, 466,000 passenger cars (down twelve percent) were exported there, which is more than every sixth car exported out of Germany. Car exports to the United States fared slightly better, dropping by six percent to 328,000, as did exports to China which only declined by just under one percent to 209,000 units.
Contact: Alexander Fritz / Phone: +49 30 8978 423 33 / Mail: alexander.fritz@vda.de
Construction industry set to continue growth in 2020 although prospects deteriorate slightly The Central Federation of the German Construction Industry (HDB) expects construction industry revenue to increase in 2019 by three percent in real terms (nominal: 8.5 percent). We are however
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expecting growth to taper off slightly in 2020, with an expected real increase in revenue of up to only one percent (nominal: around six percent). This rather more conservative estimate is based partly on the fact that following seven years of rising revenue in real terms, it has now reached a comparably high level. Also, sentiment among construction companies surveyed by the Association of German Chambers of Industry and Commerce (DIHK) in autumn 2019 was bleaker not just for seasonal reasons but is also less optimistic regarding the future than one year ago. Furthermore, while new orders still rose substantially in the first eight months of 2019 with a real increase of 3.9 percent, the rate of growth of these new orders has slowed down, even registering negative in real terms in August. This is mainly due to the weak trend in road construction – despite the investment boost – which slumped by 18.8 percent in real terms in August. The HDB attributes this to staff shortages in the planning and approval authorities, the transformation processes in order management from the federal states to the federal Autobahn GmbH, and the reticence of public contractors (particularly local authorities) due to increased prices. The overall situation remains positive nonetheless: the order backlog of companies with 20 or more employees was at 54.7 billion euros as of June 2019, which is 7.9 percent above the previous year’s level and the highest volume ever registered. The total building permits for residential and nonresidential construction (estimated building costs) increased by a nominal 3.6 percent between January and August compared to the same period the previous year. However, the different sectors are trending differently: building permits for the construction and refurbishment of residential housing went down 2.5 percent and new building permits for commercial construction (estimated construction costs) slipped 2.7 percent. Public construction was the only sector to register an increase in building permits, rising by 23.3 percent. The upturn in the construction industry is also reflected by a strong increase in the number of workers: for 2019, we expect the industry’s workforce to amount to an average of 857,000 workers. This corresponds to a rise of around 150,000 from its low in 2009 with around 705,000 workers. For 2020, we expect a further increase in the workforce of 13,000, which would bring the total up to 870,000. However, the air is getting increasingly thin on the construction labour market. The number of registered vacancies is markedly higher than the number of unemployed not only regarding civil engineers but now also for skilled construction workers. As a result, construction companies have been turning to the European labour market for many years now. Between March 2009 and March 2019, the number of foreign workers working for German construction companies rose from 51,500 to 155,000, with the proportion of foreign workers rising from eight to 19 percent. Construction companies now seem to be slowing down somewhat in employing new workers. The number of vacancies for skilled construction workers has been below the previous year’s level since September.
Contact: Petra Kraus / Phone: +49 30 21286 242 / Mail: petra.kraus@bauindustrie.de
Building materials industry: growth weakens The economic situation of the building materials industry has become somewhat bleaker in the course of 2019. From January to September, real production dipped by a marginal 0.1 percent. Growth in the first quarter was nonetheless very robust, increasing by 6.7 percent compared to the same quarter last
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year, mainly due to favourable weather conditions. In the second and third quarter growth was negative, going down 2.4 percent and 2.7 percent respectively. Demand in the building materials industry is, in part, no longer running parallel with construction activity. This is because the parts of the building materials industry that are primarily suppliers to other industries such as the steel industry (e.g. the production of lime, refractory ceramics) are more vulnerable to the overall economic slowdown and are facing reduced demand. The primarily construction-related segments, on the other hand, are largely experiencing upward production trends. Foreign trade, which plays a subordinate role in the industry due to the high transport costs of many building materials, has failed to contribute to growth in the course of the year so far. The export of building materials decreased by two percent between January and August. The German Building Materials Association (bbs) anticipates slightly upward production in 2019 with an increase of up to one percent. The forecast for the current year is confirmed by the current trend in the ifo business climate index for the manufacture of other non-metallic mineral products: while the business situation and outlook are seen as substantially less favourable, the current situation is still rated as fairly positive (as of October 2019: up 21 points). Business prospects, on the other hand, failed to buck the general downward trend in sentiment in the economy, and went down 14 points to reach a largely pessimistic level. The bbs is expecting economic momentum to continue to decline in 2020 for the building materials industry. Production in the supplier subsectors, which shares the same value chains, are also likely to continue their downward trend. Growth should continue in the building-related areas, although the current trend in building permits – also due to the high level reached here – points towards lower growth rates in future. All in all, production in the building materials industry is expected to increase by around 0.5 percent in 2020.
Contact: Christian Engelke / Phone: +49 30 7261 999 29 / Mail: c.engelke@bvbaustoffe.de
Chemical industry: no turnaround in sight In the course of 2019, the economic situation of the German chemical and pharmaceutical industry has continued to deteriorate. The producers of chemical products are feeling the brunt of weaker demand from industrial customers in Germany and Europe. After expanding in the first quarter, production in the chemical industry (without pharmaceuticals) steadily declined month after month. Overall, output between January and August was 3.1 percent less than one year previously. Almost all segments were affected by the decrease in production. The production of pharmaceuticals registered growth in the course of the year. However, compared to the previous year, which had an unusually high production level due to a special effect, production up to and including August was almost 19 percent lower. The slowdown in the industry was not only reflected in production. Sales were also significantly lower than in the previous year. Despite higher prices, chemical and pharmaceutical companies recorded a five percent decline in revenue from January to August. Against this backdrop, companies’ assessment of the current business situation deteriorated.
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Outlook: no positive signs To date, there have been no signs of an upturn in incoming orders either from major customers or from the chemical companies themselves. The companies in the industry therefore do not expect the situation to improve in the coming months. On the contrary, more companies now expect the situation to deteriorate than improve. There will be no turnaround this year. Business with domestic customers remains difficult. Germany has been hit harder than other countries by the global economic slowdown. Germany’s former strengths – high industrial share, export orientation, strong relations with Asia and a focus on vehicle and machinery manufacturing – are currently proving to be weaknesses. Industry is faltering worldwide, increasing protectionism is slowing trade, and reluctance to invest is reducing demand for capital goods. The automotive industry is not only confronted with current weak global demand but is also facing major upheavals overall. In view of this, domestic business is not expected to revive in the coming months. The situation on the European domestic market is not much better. Homemade problems such as the never-ending Brexit process are adding to the uncertainty. Growth in our customer industries in Germany and Europe is therefore likely to be restrained at best. The overseas business is currently no guarantee for growth either. The continuing smouldering trade conflict between the United States and China – with the constant switching between escalation and easing – is slowing growth in the world’s two largest economic powers. This means that no strong impetus can be expected for the foreign sales of German chemical and pharmaceutical companies. In this environment, the industry is heading for a six percent drop in production in 2019 as a whole. Admittedly, part of the sharp decline is still due to the special effect of the pharmaceutical industry, which led to distorted high production levels in 2018. But even without the pharmaceuticals business, chemical production is likely to fall by 1.5 percent this year. Chemical prices are expected to be around one percent higher than in 2018. At just under 193 billion euros, industry revenue is likely to fall short of the previous year’s level by five percent. Both at home and abroad, sales are down on the previous year – abroad due to the special effect in pharmaceuticals and the weakness of the global industry, at home due to weak industrial demand. Hopes for an upturn are shifting ever further into the next year.
Contact: Christiane Kellermann / Phone: +49 69 2556 1585 / Mail: kellermann@vci.de
German electrical and electronics industry: global insecurity constraining economic development In the first nine months of 2019, price-adjusted production in the German electrical and electronics industry fell by 3.6 percent year-on-year. Nominal industry revenue fell by 0.5 percent to 142.5 billion euros. Domestic sales fell slightly by 0.7 percent to 66.9 billion euros, as did foreign sales, which declined 0.3 percent to 75.6 billion euros. In foreign trade, revenue with customers from the euro area increased by 0.1 percent, while revenue with countries outside the euro area decreased by 0.6 percent. Incoming orders in the electrical and electronics industry also contracted slightly in the first three quarters of this year (down 1.9 percent). Domestic orders fell 1.9 percent short of the previous year’s level in the course of the year to date, while foreign orders were down two percent. The declines from the euro zone (down four percent) were higher than those from third countries (down 0.6 percent).
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At the beginning of the fourth quarter 2019, capacity utilisation in the industry declined again. It currently stands at 83.6 percent of normal full capacity utilisation and is thus 4.8 percentage points below its peak in autumn 2017. At the same time, the order backlog remained at the same level as in the previous quarter, reaching 3.1 production months. The number of employees in the German electrical and electronics industry remained at a high level throughout the year and stood at 890,500 at the end of August. In October 2019, the business climate in the German electrical and electronics industry improved again slightly. Nevertheless, it is still below the zero line and at its lowest level since September 2009. The assessment of the current business situation has deteriorated further, while companies’ outlook for the coming six months has improved somewhat. In the meantime, however, both the assessment of the current business situation (for the first time) and the general business expectations (for the eighth time in succession) are negative on balance. For 2019 as a whole, the German Electrical and Electronic Manufacturers’ Association (ZVEI) expects a decline in price-adjusted production of a similar magnitude as in the course of the year so far up to and including September. Electrical and electronic exports: restrained growth in 2019 In the first eight months of this year, exports by the German electrical and electronics industry grew at a slower pace, not least due to continuing global uncertainty, rising 3.4 percent year on year to 142.4 billion euros. China was again the largest market for domestic electrical and electronic exports between January and August. Growth in exports to the People’s Republic was, however, more moderate than in previous years, increasing by 2.4 percent to 14.2 billion euros. The United States followed in second place once again, receiving German electrical and electronic exports worth 12.9 billion euros, which corresponds to an above-average rate of growth of 11.8 percent. Between January and August 2019, France was the third largest market for electrical and electronic exports, rising by 5.4 percent to 8.6 billion euros. In contrast, deliveries to the United Kingdom (now only seventh largest export market) fell by 7.8 percent to 6.2 billion euros. The export expectations of German electrical and electronic companies improved slightly in October but are still below the growth line.
Contact: Jürgen Polzin / Phone: +49 69 6302 230 / Mail: polzin@zvei.org
Foundry industry in recession mode The mood among German foundries at the end of October 2019 is tense: the assessment of the current situation has slumped since spring 2019. The balance of good and bad ratings as of October 2019 was at minus 42 percentage points! In most of the segments of the machinery manufacturing industry with a high level of casting components, the order intake shows clear minus rates. These segments typically have long throughput times. Cast production is usually the first step in this process. This means that foundries are affected early in the downturn phase of the economy. For the foundries’ key customer group, road vehicle construction, orientation is much more difficult. The passenger car casting business is very weak. Although the automotive foundries supply throughout Europe and globally, Germany, the
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dominant production location, is still under strong pressure in car production. On the other hand, the first half of the year was very buoyant for commercial vehicle castings, as the new electronic tachographs introduced in June had a pull-forward effect. The second half of the year was correspondingly weak. Business with cast components for the construction industry was stable. Total production of cast components fell by more than four percent in the first eight months of 2019, following calendar and seasonal adjustment. The 600-odd companies operating in the industry currently employ around 80,000 workers, according to a survey by its trade association BDG. The current situation is characterised by a reduction in hourly accounts and rising short-time work. Companies try to avoid redundancies as far as possible. Nevertheless, they will not be able to avoid recession-related layoffs. Prospects for the next six months are heavily negatively influenced by the current situation, trade policy uncertainties and the still unregulated Brexit (as of October 2019). For 2019 as a whole, casting production is expected to be about ten percent below the level of the previous year. Export opportunities of casted components largely positive From January to August 2019, the revenue of foundries fell by over seven percent to 8.6 billion euros. Foreign sales shrank with the same intensity to 2.9 billion euros. Sales to customers outside the euro area exceeded the previous year’s level by one percent, going against the overall trend. Deliveries to the euro area were down by almost 13 percent. The export ratio remained stable at a good 33 percent. Export expectations as of October 2019 are markedly pessimistic due to the weak signals from foreign customer markets, especially from the euro area. Only two percent still expect exports to pick up, while 52 percent are preparing for declining exports. One should bear in mind, however, that around 80 percent of the cast components manufactured in Germany are used abroad. The indirect export via the German automotive and machinery manufacturing industries is a major lever. Growth is still being constrained by relocation trends in vehicle OEMs, their partial conversion of domestic plants to electric mobility, and by trade policy uncertainties hampering investment.
Contact: Heiko Lickfett / Phone: +49 211 6871 214 / Mail: heiko.lickfett@bdguss.de
Ceramics industry The fine ceramics industry is still registering positive growth for 2019. Currently (January-August 2019), revenue growth for the industry as a whole is at 2.8 percent compared to the previous year. Total production shows a similar trend at plus 3.9 percent. However, we should bear in mind that the comparable period in 2018 was relatively weak. For this reason, the current period is buoyed by a statistical base effect that makes the figures look more positive than they really are. Dinnerware and decorative ceramics (sales: up three percent), manufactories (sales: up ten percent) and technical ceramics (sales: up 2.4 percent) all registered upward revenue. The tile industry is unfortunately continuing its downward trend (sales: down 7.1 percent). According to the Federal Statistical Office, sales in the sanitary sector fell by 3.3 percent, though from a high level. With the
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exception of technical ceramics, which is an export-driven segment, domestic business proved more robust overall than exports. In view of the economic developments in Germany, the declining number of incoming orders, and the slowdown in world trade, this positive trend is unlikely to last until the end of the year. Particularly worrying is the strongly negative development in incoming orders, especially regarding exports. The technical ceramics segment, which for years has been the driving force behind the economic growth in fine ceramics, is particularly affected. Orders tumbled here by 16.4 percent. Technical ceramics is suffering both from the domestic economic slowdown and from the weakening dynamics of world trade. In contrast to technical ceramics, dinnerware and decorative ceramics are relatively stable. Although the number of incoming orders has declined somewhat in recent months, these segments are still benefiting from a positive order backlog. In sum, despite a good statistical starting position, the economic slowdown at home is slowly making itself felt. Foreign demand and companies’ willingness to invest are marked by trade conflicts and foreign trade uncertainties (such as Brexit). Additional momentum from foreign demand is lacking.
Contact: Philipp Pickelmann / Phone: +49 9287 808 25 / Mail: pickelmann@keramverband.de
Machinery manufacturing: persistent weak demand In machinery manufacturing, price-adjusted production in the first nine months of the year fell 1.4 percent short of the previous year’s level. This is in line with the German Mechanical Engineering Industry Association’s (VDMA) production forecast for the current year, which remains at minus two percent. In view of weak demand, the decline in production would have been even more pronounced without the cushioning effect of order backlogs, which remain high; in August the order backlog was 8.3 production months. In autumn, however, this buffer seems to have lost its effect. According to the results of the ifo economic survey, average capacity utilisation in the industry fell to 83.9 percent in October. In July, this figure stood at 86.6 percent. This is the first time since January 2017 that capacity utilisation has been below the long-term average of 86.2 percent. The factors hampering production have also changed: shortages of material and skilled workers are now only affecting seven and 13 percent of surveyed companies respectively. However, 35 percent of companies meanwhile see their production constrained by a shortage of manpower. In the first eight months of the year, machine exports fell short of the previous year’s level to almost the same degree as production, with a decrease of 1.4 percent in real terms, and a small increase of 0.2 percent in nominal terms. Of the top 10 export markets, four trended positively: the United States, France, Switzerland and the Czech Republic. The other markets displayed a downward trend. Only the number of employees has not declined: 1,067,000 employees in August represents an increase of 0.7 percent compared to the same month last year. However, since the employment curve has stagnated at a high level in recent months, the increase of the past few years seems to be over for the time being. There are currently no rays of hope in sight for the coming months. Incoming orders are under pressure up to September, the current statistical edge. The decline accumulated in the first nine months of the
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year amounts to eight percent. Triggering the drop is an unfortunate mix of dwindling economic momentum worldwide, an excessively high number of politically motivated upheavals, and structural change in the automotive industry. In contrast to some other forecasting institutes, the VDMA is not anticipating machinery manufacturing to grow in the coming year either, forecasting minus two percent in September. Even if the economic weakness of industry does not spill over into services and the mostly politically induced risks fall again, a global upswing would not be expected until the first half of 2020 at the earliest. As a result, order intake in machinery manufacturing is unlikely to pick up again before the middle of the year. That would be too late to put machinery production in Germany back on track for expansion in 2020.
Contact: Olaf Wortmann / Phone: +49 69 6603 1373 / Mail: olaf.wortmann@vdma.org
Nonferrous metal industry The German nonferrous metal industry has dampened expectations for 2020. In the first six months of 2019, the industry produced 4.2 million tonnes (down four percent compared to the dynamic first six months of 2018). With a combined workforce of 112,000, the around 650 companies in the industry generated a revenue of 26 billion euros, 88 percent in the European Union, and 52 percent 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 the first six months of 2019, the aluminium industry produced around 629,000 tonnes of raw aluminium, six percent less than in the same period the previous year. The semi-finished aluminium product industry recorded an increase in production of two percent, going up to 1.3 million tonnes. Production in the aluminium further processing segment, on the other hand, dropped by five percent, down to 185,000 tonnes. In base metals (copper, zinc, lead, nickel, tin and rare metals), raw metal producers decreased their output in the same period by two percent, down to 611,000 tonnes. Producers of semi-finished base metal products recorded a hefty drop of 13 percent, down to 835,000 tonnes. The nonferrous metal foundry industry produced 616,000 tonnes of cast parts in the first six months of the current year, which is two percent less than in the first six months of 2018. In view of the economic risks (Brexit, trade dispute between the United States and China, structural transformation in the automotive and automotive component industries), production in the nonferrous metal industry is set to drop by around four percent in 2019. United Kingdom only fourth largest export market in the first half year of 2019 (biggest in 2018) The foreign revenue of the nonferrous metal industry in the first six months of 2019 amounted to 13 billion euros. This corresponds to a slight increase in the export quota to 48 percent. Germany is a net importer of ores and concentrates as well as crude metal. 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 raw metals such as aluminium, nickel, zinc, tin and several rare metals. Imports of raw metal decreased by nine percent in the first six months of 2019 compared to the same period in 2018, going down to two million tonnes. Exports of raw metal saw a strong increase of eleven percent, rising to 495,000 tonnes. Germany is, on the other hand, a net exporter of semi-finished products. The export-oriented semi-finished products industry suffered from the stalling economic
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momentum worldwide, with exports slumping 21 percent to 1.4 million tonnes. Imports amounted to 1.1 million tonnes (down six percent). The United Kingdom, the biggest market for the German nonferrous metal industry in 2018, was only its fourth biggest market in the first six months of 2019. Only eight percent of exports of raw metal and semi-finished products were destined for the United Kingdom. Exports to the UK caved in by 39 percent, down to 143,000 tonnes, with imports from the UK down 15 percent to 129,000 tonnes.
Contact: Oliver Eisenberg / Phone: +49 30 7262 071 67 / Mail: eisenberg@gdb-online.org
Situation of the steel industry in November 2019 In the course of the year, the steel industry in Germany deteriorated perceptibly. The amount of rolled steel supplied to the market dropped by twelve percent between January and August compared to the same period last year, incoming orders for rolled steel by seven percent and the production of raw steel by four percent. The weak economic situation of the main steel processing industries is also reflected in the revenue, which dropped nine percent from January to July 2019, with domestic revenue decreasing by as much as twelve percent. The ifo business climate index is now at a 10-year low. In the EU as a whole, demand for steel in 2019 was substantially below previous expectations, although the reductions were not quite as pronounced as in Germany. The European steel association Eurofer expects the volume of rolled steel supplied to the market to drop by three percent this year. A lateral movement is anticipated for 2020 based on the real demand from customer industries. The pressure from imports remains high. Although rolled steel imports in the first eight months of 2019 dropped seven percent compared to the same period last year, this follows on from an increase of 13 percent in 2018. Safeguard measures have failed to effectively protect against trade diversions caused by U.S. steel duties. The economic parameters for the steel industry are also challenging worldwide. While the latest forecast from Worldsteel anticipates the volume of rolled steel supplied to the global market to increase by two percent, the OECD has reported a renewed increase in global steel capacities. The structural problems in the global steel industry have thus not yet been resolved.
Contact: Bernhard Krischer / Phone: +49 211 6707 963 / Mail: Bernhard.Krischer@wvstahl.de
Steel and metal processing: production 3.9 percent down year on year after three quarters The politically induced global uncertainties of investors and car buyers are affecting steel and metal processing companies in Germany in the third quarter. Production in the third quarter 2019 was almost seven percent down year on year. For the year as a whole, the decline amounts to 3.9 percent. Production has now contracted for two consecutive quarters in 2019 (Q2 by 2.7 percent compared to Q1 and Q3 by 3.3 percent compared to Q2), which is in effect a technical recession. Nevertheless, there are grounds for hope for the final quarter, on the one hand due to a statistical base effect – the last quarter of the previous year was weak – and on the other hand due to the signs of easing in U.S.
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trade policy, both towards China and with regard to the threat of import duties on EU vehicles. If the last quarter draws level with the fourth quarter of the previous year, the decline in production for the year as a whole would be limited to three percent. Despite the decline in international trade, exports continue to have a stabilising effect on the sector’s economic development. While deliveries to domestic customers fell by six percent, exports were only 2.9 percent below the previous year’s volume. The development of incoming orders so far does not point towards a recovery any time soon. At minus 9.7 percent, domestic orders are down by a similar degree to foreign orders, which are at minus 8.4 percent for the year. However, short-term postponements and cancellations mean that customer orders are hardly meaningful and very volatile, especially in economically tense periods. Production capacity utilisation has now declined for the fifth quarter in succession, falling to 78.3 percent in October. This is the lowest it has been since January 2013. Nevertheless, companies are holding on to their employees. In August the number of employees was 0.4 percent higher than in the previous year. However, the long-lasting phase of a strongly expanding workforce has been interrupted, at the least. The mood in the industry is uncertain, as are the economic indicators. After a temporary improvement in the previous month, the business climate for steel and metal processing companies returned to its original trend in October. The assessment of the current business situation deteriorated by 5.5 points, while the outlook for the coming six months dropped by 4.9 points.
Contact: Holger Ade / Phone: +49 233 1958 821 / Mail: hade@wsm-net.de
Textile and clothing industry The past few months have not been satisfactory for the industry. After an equally unsatisfactory year in 2018, in which the clothing sector, in particular, suffered setbacks, hopes of a recovery in the course of 2019 have not been fulfilled. The textile segment has been in a downturn for several months, and the clothing segment is also pointing downwards again after an initial recovery. After a longer and steady growth phase, textiles remain in the downturn phase that set in in the fourth quarter of 2018. This downward trend has affected all major areas including wovens, nonwovens and technical textiles. Only technical textiles managed to reverse the downward trend in the course of 2019, but this was not enough for an overall turnaround. Currently, as of August, the decline in revenue is 3.6 percent compared with the same period in the previous year. As these segments largely represent the industrially used product groups, which are extremely important for the industry, this is fully reflected in the overall negative result shown by the latest figures. Clothing began 2019 with a trough in revenue and was fortunately able to increase sales by a few percent in the first quarter. However, hopes for a sustained improvement were not fulfilled in the end, and clothing also slipped back into the red, with revenue falling by 0.7 percent year on year as of August.
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Employment is now following the downward trend: at the end of August 2019, the workforce was 2.9 percent smaller in the sector as a whole than at the same time last year. The figure was minus 4.2 percent for textiles and 0.3 percent for clothing. Given the negative trend, the annual average employment is likely to be negative in both segments. The clothing retail trade is not benefiting from the comparatively good consumer mood. While retail overall is up 3.7 percent in 2019 so far, the clothing retail trade has experienced a slight decline of 0.3 percent. However, the situation seems to be improving. The third quarter 2019 saw revenue increase by a promising two percent. In foreign trade, clothing recorded an increase in exports of 3.5 percent, while textiles recorded a decline of 3.2 percent. Here, too, the clothing segment is coping comparatively better with the difficult international situation than the textile segment. As far as the short-term outlook is concerned, the ifo business climate index shows that the textile segment is trending in line with the declining expectations of the industry overall, while clothing has held up comparatively well so far. However, new orders have recently decreased significantly, particularly in clothing. Overall, a short-term and lasting turnaround is currently not on the horizon.
Contact: Marcus Jacoangeli / Phone: +49 30 7262 2024 / Mail: mjacoangeli@textil-mode.de
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 – November 2019“ as of 19 November 2019.
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