Our outlook for the manufacturing industry in Germany for 2019
The economic outlook for 2019 for the German manufacturing industry is currently strongly impacted by the uncertainties related to potential trade barriers with the US (driven by the Trump administration) and the UK (as a result of Brexit). These political uncertainties as well as the slowdown in economic growth in major export markets such as China will affect exports of manufactured goods and will have a negative impact on the investment activities of export-oriented manufacturing companies. However, the economic outlook for 2019 varies across the different manufacturing sub-segments:
- The German Mechanical Engineering Industry Association (VDMA) generally reports a positive outlook for 2019, even though it recently lowered its production forecast from +2% in real terms to +1%.
- The automotive industry is currently facing multiple challenges, such as the new Worldwide Harmonized Light Vehicles Test Procedure (WLTP), declining domestic demand, and a slowdown of the economy in major export markets such as China.
- Among the industry segments that are the first to feel the economic downturn is the chemical industry since in many manufacturing sectors, companies tend to rapidly reduce their orders for materials as soon as there is a decline in incoming orders. For 2019, the German Chemical Industry Association expects a decline in output of -3.5%.
- The electrical engineering and high-tech manufacturing sub-sector expects a slowdown as a result of declining demand from its largest customer regions, China and the US, and the related trade conflicts. On the other hand, potential investments by industrial manufacturing customers in 5G will offset the decline for providers of 5G infrastructure components – but only in the longer run.
In summary, teknowlogy expects the overall economic outlook for 2019 across the various manufacturing sub-segments to negatively impact the level of investments in IT projects, which will, however, differ depending on the sub-segment: whereas automotive OEMs and suppliers will tend to reconsider some of their planned IT projects, teknowlogy believes that the mechanical engineering segment will continue investing in digital transformation, and particularly in new, data-driven business models, due to the need to achieve a sustainable, long-term, and global competitive advantage.
For more details on our view of the German manufacturing industry in 2019, read our full report.