German mechanical engineering sector concerned by poor domestic demand

Germany's mechanical and plant engineering sector is increasingly concerned about persistently weak domestic demand for its products, the Machinery and Equipment Manufacturers Association (VDMA) said on Monday. 

Johannes Gernandt, the VDMA's chief economist, said there was deep concern that domestic orders are continuing to shrink month by month. 

"This shows how battered Germany is as a business location and how urgently it needs sweeping reforms," he said.

In August, the export-oriented sector suffered a setback with orders falling 5% in value compared with the same period a year earlier, partly due to a lack of large orders. Foreign orders were even weaker, declining 6%.

Over the less volatile three-month period from June to August, foreign orders grew 11%, while domestic orders fell 1%. 

Overall, orders rose 7% compared with the weak prior-year period. For the first eight months of this year, the association recorded growth of 4%.

Capacity utilization nonetheless remains low: Just two weeks ago, the VDMA cut its production forecast for the current year to a decline of 2%. After four years of contraction, growth is not expected to return until 2027.