Outlook for production and sales in the German machinery industry
Production and sales have been fluctuating less in 2014. Relief or calm before the storm?
Up to November data for production and sales of the German machinery industry are represented from the Federal Statistical Office. We put these data into the context since the outbreak of the world economic crisis 2008/2009. That makes it easier to answer the question, in which situation the machinery industry is and which development for the future will be probable.
Production of machinery industry has been fluctuation in smaller range in 2014
Update January 12th, 2015 - The diagram makes the main trends in the course of production since the beginning of 2008 up to November 2014 visible:
- How production of the machinery industry plunged lower and lower in 2009 achieving its lowest point in January 2010.
- How production rapidly climbed higher and higher in 2010 almost achieving the pre-crisis level - falling again
- How production has been swinging since 2011 in large moves up and down.
The last point, production swinging in large moves since 2011, shows four characteristics:
- The production tops do not become higher, so there is no growth trend.
- The production lows do not become lower, so there is no crisis-laden downtrend.
- So production has been stagnating on an average level of 113.4 index points with fluctuations to the up and downside remaining below the pre-crisis level and above the crisis low.
- This trend for stagnation is in effect since 2011, i.e. lasting for nearly four years.
In September production approached the top of the sideways range, rebounded in October and slightly increased in November. This trendless up and down of production around its average level of 113.4 index points is confirming the ongoing effectiveness of the sideways movement in November 2014.
The range of production's up and down has been reduced so far in 2014. That is why the current annual high of 2014 did not exceed that of the previous year yet (130.6) and the current annual low lies above the low in 2013 (94.3) so far.
Such decreased dynamic will often serve as preparation stage for establishing new production highs as well as new lows. That can be derived from the diagram.
Sales too fluctuating less in 2014
Sales have been showing the same type of the development as production. However, two differences are showing up.
The sideways movement started 2012 and not as with production in 2011.
And sales exceeded their pre-crisis level of 2008 (137.0) four times from 2010 to 2013. The crucial point according to our opinion is however that the pre-crisis level was not exceeded in a stable manner.
The diagram shows the average level of the German machinery industry's sales within the sideways range since 2012. This level lies right in the middle between the lowest and highest sales during this period and accounts for 121.3 index points.
This average line is to facilitate the evaluation of the current sales this year.
In August sales plunged to 111.3 index points, then sharply increased to their annual high in September (139.8 indexpoints), again dropped in October and newly slightly increased in November. This is typically for sideways ranges that are missing any up or downtrends, in fact, dominated by a trendless up and down.
The sales too as the production have been fluctuating in a reduced range in 2014 so far. The diagram shows us for the years 2012 and 2013 how reduced ranges may lead to larger peaks.
World economic background for this development
The worldwide industrial production is showing a close relation of growth, stagnation and setbacks to each other appearing in all of the three country regions being important for the world economy, i.e. the industrialized countries, the BRIC and MIST countries.
This mixed situation of growth, stagnation and setbacks in the world economy reflects itself in the development of the export-oriented machinery industry in 2014 hindering so far both a deeper sagging as well as a continuous growth of production and sales compared to the previous year. Hence quite larger fluctuations may arise.
A typical development of the world economy for the stage of crisis overcoming would be a unified growth of the worldwide industrial production. However, the close entwinement of growth, stagnation and setbacks indicates a non-typical development, affected by the three resp. four structural changes, which were already analyzed in the Quest Trend Magazine.
They are also leaving their mark on the stage of crisis overcoming in the German machinery industry.