Given the weakness of world trade, machine tool manufacturers have come under increasing pressure in recent months. Order intake in 2019, adjusted for prices, fell by 19 percent year-on-year. The decline in new orders, which began to accelerate in March, initially had relatively little impact on production. Gradually, however, the order backlogs were increasingly worked off, with the result that capacity utilisation fell well below its long-term average. At the beginning of last year, the time taken to process the order backlog was still more than five months. At the beginning of 2020 it was only 3.9 months. Production and exports have also fallen at an above-average rate recently.
With its barely standardized products, machine tool manufacturing is one of the industries lagging behind the economy, not least because of the time required between order intake and completion. Analogous to the mechanical engineering industry as a whole, machine tool manufacturers are also disproportionately dependent on demand abroad. Thus, the industry generates around 63 percent of its sales outside Germany. In the manufacturing industry as a whole, the foreign sales ratio is just over half.
The slump in incoming orders in the machine tool industry was much more severe than in mechanical engineering (-9.7 percent) or in the manufacturing industry as a whole (-6.0 percent). This also demonstrates the very high cyclical dependence of the machine tool industry. Machine tools are ordered when the existing capacities are well utilised and are to be further expanded. However, this is not the case at present in view of the weakening global economy.
The mood in the industry is currently extremely poor. The past few years have already been characterized by a tendency towards below-average growth. For 2020, the German Machine Tool Builders‘ Association (VDW) even expects a decline in production of 18 percent. Even if the result should not be quite as weak, the industry is likely to face its worst result since the crisis year 2009