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German Machine Tool Industry Faces Downturn as Q3 2023 Orders Decline by 9%

by Anna

The German machine tool industry encountered a setback in the third quarter of 2023, experiencing a 9% decline in orders compared to the same period last year, as reported by the German Machine Tool Builders’ Association (VDW). Domestic orders fell by 8%, while foreign orders registered a 9% decrease. The cumulative decline in orders during the first three quarters of 2023 reached 7%, reflecting a challenging period for the sector.

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Dr. Wilfried Schäfer, Executive Director of VDW, expressed concern over the lack of signs indicating a turnaround in incoming orders for the German machine tool industry. The ongoing global economic impact of low investment levels, compounded by high interest rates and costs, has contributed to the downturn. Germany and Europe, in general, are experiencing a slowdown in investment, with a noticeable shift in consumer demand toward services.

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Inventory levels, previously built up during supply bottlenecks, are now declining, alleviating some pressure on costs as inflation rates start to recede. However, foreign orders, especially from Europe and Asia, are notably down. The Chinese economy faces challenges, including low consumer demand and struggles in the real estate sector. In contrast, the US economy demonstrates more resilience, currently outpacing China in terms of orders.

Dr. Schäfer highlighted that the sector’s large backlog of orders is providing some stability during these challenging times. Turnover is increasing at a double-digit rate of 14% in nominal terms, although growth is gradually stabilizing. Capacity utilization experienced a slight decline from 90.5% in July to 88.5% in October. The sector employs 65,000 individuals as of the first half of the year.

Despite the challenging circumstances, Dr. Schäfer reaffirmed a production forecast of 10% growth for the current year. However, he acknowledged that uncertainties loom over developments in the coming year.

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