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Fluctuations of production and sales of German machinery industry 2008 - 2019

Larger fluctuation range of production and sales of machinery industry since world economic crisis

Since the year 2000 much has changed in the course of the worldwide industrial production – structurally changed. Four structural changes has already been starting in 2000, a fifth one is related to the process of crisis overcoming. This report adds a sixth one, the increasing fluctuation range of production and sales such as machinery industry.

Update March 3rd, 20209 - The diagram shows the development of the production index in the years from 2000 to 2019. This period is divided into five economic phases, which are oriented to the trend line (middle line in the diagram).

Production of German machinery industry from 2000 to 2019.

The two pink coloured bands belong together with the middle dark line to the Bollinger Bands, a widely used gauge for the fluctuation range of sizes. The Bollinger Bands are explained clearly in the left column.

In short, the pink bands comprise 95% of the deviations of the current production index from the average of the last 12 months (dark middle trend line).

Range of fluctuation in production increases by 18% since 2013 despite stagnation resp. light growth

The five boxes at the bottom of the graph show the fluctuation ranges of production for each business cycle.

From 2000 to 2004, the range of fluctuation of production around the one-year average was 27.4 index points. In the growth phase following the global economic crisis of 2000, the fluctuation range increased to 32.3 index points, jumped to 43.5 index points in the last global economic crisis and stabilised at 38.1 index points after the crisis had bottomed out.

A fluctuation band of 38.1 index points with a production index value between 90 and 116 index points in 2018 means that the overall upward and downward fluctuations account for 38% of the monthly production values, approximately 19% upward and 19% downward deviations.

Comparing the two economic cycles after the two world economic crises of 2000 and 2008, the range of fluctuation in production since 2012 is by 18% greater than in the comparable economic cycle from 2005 to 2008.

Moreover, the comparison leads to the fifth structural change in the course of industrial production: an economic crisis is usually followed by an upswing phase, a boom similar to the one between 2005 and 2008. By contrast, once the crisis had bottomed out in 2012, production in the machinery industry stagnated for the most part or grew only sligthly - with a wider range of fluctuation.

Reduced fluctuation range 2019 indicates breakout

In 2019, the fluctuation margin shrinks to 31.1 index points. Production is declining, and new production lows have so far failed to appear. This is reflected in a reduced fluctuation margin.

In many applications of the Bollinger Bands, this is seen as a sign of an impending breakout to the upside or downside. In this case, it indicates a deep drop in production.

To the reasons of a larger fluctuation range with stagnating or slightly growing production of machinery industry

First it is the situation of the worldwide industrial production that reflects itself for the machinery industry, which the report indicates for the fifth structural change in such a way:

  • “In place of a general upward business trend for the overcoming of an economic crisis a non-uniform process of the crisis overcoming has emerged during which growth, stagnation and decreases of the industrial production co-exist producing a stagnant total tendency by interaction with industrial production swinging up and down around this level for some time and in different countries.”

This covers the stagnating total tendency with fluctuations upward and downward but not yet the increasing fluctuation ranges (at stock exchanges well-known as volatility).

It belongs to the bases of these increasing fluctuation ranges:

  • The stagnating total tendency of the world economy is expression of sinking profit margins in particular for capital-widening investments. That is the reason to restraint investments and demand for machines.

  • Against this background competition regarding selling machines has been getting fiercer. So with production stagnating successful orders as well as lost orders providing a stronger impact than with increasing production.

  • Under these complicated conditions companies are throwing the towel, which others take up intensifying likewise the fluctuations.

  • The emerging countries are losing more and more their character as developing country becoming like China world market-influencing global players. This opens up both larger new and lost orders intensifying fluctuations.

To the effects for the machinery industry under non-crisi conditions will belong to increase the third-party share of production, to widen the product portfolio and to strive after a leading market position or to strengthen it. Under the expected global economic crisis conditions, the effects on the fight for survival will be condensed.

Range of fluctuation in sales increased by 27% to €7.4bn since 2013 with weaker growth

The development of sales is divided into five economic cycles in a similar way to production.

Sales of German machinery industry from 2000 bis 2019.

Comparing again the fluctuation range of sales since 2013 with the comparable economic phase from 2005 to 2008, the fluctuation margin of sales since 2013 is €7.4bn, thus 27% higher than in the years 2005 to 2008.

The recent greater fluctuation in the range of sales is associated with weaker growth compared to the years 2005 to 2008.

To the reasons specified the price war comes up, to what extent the customer of German machines requires higher function variety and higher efficiency and to what extent he is also determined to pay for them.

In 2019, the fluctuation margin is reduced to € 5.7 billion with declining sales, as the dark red trend line confirms. As with production, this indicates an imminent collapse in sales.

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