Outlook for production and sales in the German machinery industry
Hefty setback of sales in the German machinery industry - typically in a sideways range
For this first half-year and beyond until August the 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.
Main trend of production: From the crisis low into a large sideways movement since 2011
Update October 7th, 2014 - The diagram shows the course of production since the beginning of 2008 up to this August.
Three items are clearly showing up:
- how the 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
- as 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 following a trend for stagnation below the pre-crisis level and above the crisis low.
- This trend for stagnation is in effect since 2011, i.e. lasting for three and a half years.
Also in the first half-year including August production is moving in large sideways moves. In previous articles we had determined the start of the production's stagnation for 2012.
Main trend for sales: sideways movement since 2012
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 121.4 index points.
This average line is to facilitate the evaluation of the current sales this year.
The hefty setback of sales in August to 111.3 index points is typically for sideways ranges. For sideways range means there is neither an uptrend nor a downtrend, in fact a trendless up and down.
Background for this development
This large sideways movement as the current effective main trend becomes understandable with view of the export markets of the German machinery industry:
- Also the worldwide industrial production could not stable exceed the pre-crisis level so far.
- Individual countries and regions that are important for the sales and the exports of machines are showing a mixed situation: Germany and the USA are currently moving above their pre-crisis level; China, Mexico, Indonesia, Turkey, and South Korea have clearly exceeded theirs; Russia, Brazil, India are stagnating; finally the EU countries are still far away from their pre-crisis level.
Outlook for the course of the production of machines
When would the current on-going phase of the stagnation be completed?
- If production would grow lastingly above the pre-crisis level (134.2) thus starting a growth trend.
- If production would achieve or drop below the crisis low (71.5) thus arising an acute crisis.
As the stagnation phase has already been persisting since three and a half years, the probability speaks for the fact that it will continue.
It suggests also that the protectionism on the export markets of the German machinery industry has noticeably increased this year. The World Trade Organization (WTO) warned in June that the countries of the G20 (containing the USA, the European Union and China) imposed more protectionist measures in favour of their products and markets than measures in favour of free trade. (FT.com, 18 June 2014)
The Ukraine crisis shows likewise, how the tendencies towards a stagnant world economy intensify the political struggle for spheres of influence and markets in an escalating manner.