German Machine Tool Orders Rise Again in Second Quarter

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In the second quarter of 2010, order bookings for companies in the German machine tool industry unexpectedly rose steeply again, this time by 71%. Domestic demand soared by 81%, and export orders were up 66%. The statistics were issued by VDW (Verein Deutscher Werkzeugmaschinenfabriken), the German Machine Builders’ Association.

Increases in demand for the first half of 2010 (relative to 2009’s first half) were 58% overall, 51% domestically, and 61% for export orders.

“The order engine is running at full throttle again,” says Dr. Wilfried Schäfer, managing director of the VDW. “The steepest slump in the history of the machine tool industry has now been followed by the highest growth rates we’ve seen since the early 1970s.”

Schäfer finds particularly gratifying the high rate of growth in domestic demand during this year’s second quarter. This, he explains, shows that production output has found its feet again across the spectrum of German industry.

Other important machine tool statistics are trending upward as well. Capacity utilization has climbed from its nadir in the middle of last year (65.9%) to 76.3% in June of this year, while the order backlog, following its low point of 5.6 months in October 2009, has recovered to 6.9 months in June 2010. In view of the downsized total capacity, however, this should be regarded as especially encouraging. In addition, sector employment, while being almost 10% lower than a year ago, has discernibly stabilized in the past few months.

VDW’s Schäfer points out that the situation contains some imponderables, such as setbacks on the US market, the anticipated slowdown in China’s growth and risks in the financial market. Therefore, he affirms, “the VDW’s forecast of a 12% fall in sales remains in force.” Despite an improving business situation, sector sales figures will show a minus because order backlogs continue to be thin, because the high growth rates in order bookings can be attributed to a baseline effect (order volume decreased 66% in the first half of 2009), and because it is uncertain when current order bookings will show up in actual sales figures.

Differentiation between manufacturers of general-purpose machine tools and makers of customized machines is key. Companies producing general-purpose machines who had sufficient liquidity to fill their component stores are now able to deliver quickly and can certainly book sales during this year. Most customized-machinery manufacturers need longer lead times, however; Schäfer suggests that their coffers will not start filling again until next year.